Scalping is a trading method that attempts to profit quickly off the smallest price moves in the lowest time frames like level 2 quotes or one minute charts. The primary edge in this strategy is speed, the ability to get in and profit and get back out in as little as seconds and no more than a few minutes. Scalping is the fastest form of day trading trying to make small moves add up to profits through large position sizing or volume of trades executed
Scalping requires using algorithms for automated trading strategies or extreme discipline and focus executing trades with hot keys and a fast internet connection. Scalping tries to have large win rates of small profits with minimal losses as one large loss can wipe out many hours or days of small profits. Scalping takes concentrated and focused screen time for human execution along with mental stamina and stress management.
Traditional scalpers are the market makers that profit off the bid/ask spread for the stock they trade the book on. Modern scalpers can also be high frequency traders that use algorithms and the fastest connections nearest the exchanges to execute trades in less than a second to profit off the changing bid/ask spreads along with other edges they have found in price patterns.
Scalping can be one of the most difficult methods to profit on as the trader is competing with algos, HFTs, market makers, and computers to find an edge. A scalping strategy can be as simple as trading candlestick breakouts on the one minute chart or as complex as running an algorithm on the level 2 quotes.
