Scalping
Family VII · Market & styles
Not to be confused with day trading, forex scalping, scalping forex.
Scalping is a high-frequency trading style in which a position is opened and closed within a very short interval, usually seconds to minutes, to capture small price changes. It relies on tight spreads, fast execution and repeated trades rather than on large per-trade gains. Because costs are incurred on every round turn, scalping is highly sensitive to commissions, spreads and slippage.
Mechanics and cost sensitivity
A scalper aims for a small target per trade and accepts a similarly small stop, so the outcome depends less on any single trade than on the aggregate of many. Each round turn pays the spread and any commission, so a strategy that targets a few ticks can be turned negative by transaction costs alone. Execution speed, order type and liquidity at the moment of entry all affect the realised fill.
Typical instruments are those with narrow spreads and deep liquidity, such as major currency pairs, index futures or large-cap equities. Holding periods are short enough that overnight financing and gap risk are usually avoided, but the number of decisions per session is high.
Worked example
Assume a trader takes 40 trades in a session on an instrument with a 1-tick spread, a per-trade commission equivalent to 0.5 tick per side, and an average gross gain of 3 ticks on winners.
The same 3-tick gross target yields only 1 tick net, so the win rate required to break even rises sharply as costs increase.
Operational requirements
Scalping places demands on latency, platform reliability and order routing. A delay of even a fraction of a second can change the fill price enough to erase the intended edge. Traders also need a rule set that defines entry, exit, maximum loss per trade and a daily stop, because the high trade count magnifies both discipline failures and cost accumulation.
Regulatory treatment of high-frequency and short-term trading varies by jurisdiction and by broker; some venues restrict certain order types or apply different fee schedules. Margin requirements and available leverage for short-term positions also differ between brokers and countries.
Often confused with
- day trading
- Day trading closes all positions before the session ends but may hold a single position for hours, whereas scalping holds for seconds to minutes; the visible sign is the number of round turns per session.
- forex scalping
- Forex scalping is scalping applied specifically to currency pairs, so the instrument is the currency market rather than any market; the visible sign is that quotes, spreads and sessions are quoted in currency pairs.
- scalping forex
- Scalping forex is the same activity described with the market named second, used mainly as a search phrase rather than a distinct method; the visible sign is identical currency-pair pricing and short holding times.