Stock scalping is a trading strategy that involves buying and selling stocks quickly, often within seconds or minutes, in an attempt to profit from small price fluctuations. Scalpers take advantage of short-term market patterns by making many trades throughout the day, sometimes dozens or hundreds.
Because it’s so fast-paced, scalping trading requires a speedy and reliable trading system, including a powerful computer and reliable internet connection to minimize any lag between trades.
This article will explain all things scalping: meaning, strategies, pros, cons, and risks.

What is Scalping in Trading?

Scalp trading’s defining feature is its small-win focus. Rather than searching for a few large movements throughout the day, scalp traders exploit the frequent, inevitable small movements for a given stock. These small movements are more frequent, less risky, and easier to capture.
Scalping is ideal for traders with a low-risk tolerance and high endurance; many risk-averse traders perk up when learning the scalping vs day trading comparison.
Picture of stock charts

Scalp Trading vs. Day Trading

Scalp Trading:

Scalping takes advantage of the day’s numerous small price fluctuations. Rather than waiting for a few large movements, this method works little by little, profiting with each low-risk low-reward trade.

Day Trading:

Day traders make a few trades per day compared to the hundreds that scalp traders may perform. They also use different analytical tools to set up trades. Learning day trading for beginners displays how one trade can span a few hours rather than a few seconds.
In other words, both scalping and day trading typically occur within the same day, but day traders execute a lower number of trades per day compared to scalpers.

Scalping Stocks

High liquidity:

Because of stock scalping’s fast-paced nature, ideal stocks have a high enough volume that entry and exit are quick and slippage is minimal.

Low bid-ask spread:

Narrow bid-ask spreads indicate high liquidity, meaning you won’t get stuck in a trade for longer than intended.

Volatility:

Price movements = profit opportunities. A stock that remains steady throughout the day is completely wrong for scalping.

Strong intraday trends:

Price movements = profit opportunities. A stock that remains steady throughout the day is completely wrong for scalping.

Reactivity to news and events:

Stocks that respond to news headlines are typically more volatile, providing ample opportunity to profit from swings.

Scalping Stategies

You’ve probably seen claims that someone found the best scalping strategy that trumps all others. In reality, different strategies have different results for different types of traders. The only way to find your best method is by testing them out live. For example, pro-risk traders might prefer futures and options scalping whereas others enjoy trading regular stocks at the 1:1 risk-reward ratio.
Here are some of the best scalping strategies to try out:
Picture of stock charts

Moving Average Crossover

This scalping trading strategy involves using short-term and long-term moving averages to determine buy and sell signals. When the short-term moving average crosses above the long-term moving average, it’s a potential buy signal, and when the short-term moving average crosses below the long-term moving average, it’s a potential sell signal.
Scalpers using this scalp trading strategy buy near support levels and sell near resistance levels to mitigate losses when capturing short-term price movements.

Breakout Scalping

This scalping trading strategy involves identifying stocks that are trading within a narrow range, and waiting for a breakout to occur. Once the stock price breaks out of the range, the scalper will enter a trade with a stop-loss order to limit potential losses and a profit target based on the size of the breakout.

Momentum Scalping

Momentum scalping is exactly what it sounds like: capitalizing on strong, rapid price movements and taking advantage of existing momentum. Using indicators like the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD), scalpers will look for stocks exhibiting high trading volumes and significant price movements and enter trades in the same direction as the trend.

Tick Scalping

Tick scalping, a perfect representation of stock scalping, involves quickly entering and exiting trades based on small price movements known as ticks. Also known as tick chart scalping, this strategy uses hourly and second charts to get the closest possible look at each tick.
This strategy requires a strong ability to interpret charts and access to fast and reliable trading technology.

Honorable Mentions

1-minute scalping strategy

This chart helps traders execute short-term trades following momentum, using flag pole signals, or using the VWAP indicator.

Bollinger Band Scalping

This method helps traders identify buy and sell signals based on price movements exceeding the bands. Bollinger bands settings for scalping may differ from long trades.

Pivot Point Scalping

Pivot points are levels of support and resistance based on the previous day’s price action.

Fibonacci Retracement Scalping

This scalping strategy uses Fibonacci ratios to identify potential levels of support and resistance.

Heiken Ashi Scalping

The Heiken Ashi scalping strategy is often used with other candle bar charts to better predict future prices and avoid false signals.

Stochastic Oscillator Scalping

Using the stochastic oscillator for scalping is popular because it’s easy to read and highly accurate.

Common Scalp Trading Myths

It’s easy to overgeneralize scalping as a low-risk, monotonous strategy, but don’t be so quick to judge:

Myth 1: Scalping is a risk-free way to make quick profits

Yes, scalping is viewed as a low-risk approach to day trading, but it carries its own set of risks, including market volatility, execution challenges, and unexpected price movements.

Myth 2: Scalpers always use leverage

Leverage enhances profits, but not everyone uses it – especially beginners.

Myth 3: Scalpers rely solely on technical analysis

Successful scalper traders also consider market news and events when making trading decisions.

Myth 4: Suitable for all traders

Scalping trading requires quick decision-making, concentration, and the ability to handle fast-paced trading environments. Consider your risk tolerance, temperament, and mental endurance before picking up scalping.

Pros and Cons of Scalp Trading

Now that you understand what scalping is, here are a few pros and cons to better decide if scalping is for you and what the best scalping strategy might be for your personality.

Pros

Scalping can be incredibly profitable and enjoyable for the right people:
You can see that scalpers aren’t restricted by factors that may affect other trading strategies.

Cons

Scalp trading isn’t all profits and click-through automation, though.
Every trader is different, and some traders may be able to minimize these disadvantages to make scalping more engaging.

7 Tips of Scalp Traders

Create a Trading Plan

Outlining goals and stop-loss levels beforehand makes emotional trading less likely.

Focus on Risk Management

Losses are huge time-wasters in stock scalping; learn how to minimize them ASAP.

Limit Costs

Choose a broker with competitive commissions, direct access to markets, and no daily trade limits.

Have Discipline & Patience

Keep the “small wins” mentality and avoid emotional trading.

Use the Right Time Frames

The 15-minute chart is popular, but you may want to go as small as the 1-minute chart.

Monitor Multiple Stocks

While watching just one stock will get boring and limit your trading opportunities.

Learn & Adapt

If a scalping trading strategy isn’t working, don’t be afraid to move on and revisit it later.

Choosing the Right Tools for Scalp Traders

Essential Technical Indicators

Beginner scalper traders should familiarize themselves with chart-reading and analysis skills, becoming experts in spotting buy and sell signals. Whether scalping, trading options, or swing trading, every trader should know how to use the basic indicators like:

MACD

indicates bullish or bearish momentum and confirms the strength of price trends

Moving averages

indicates oversold or undersold conditions to suggest how quickly an asset will move

RSI

indicates oversold or undersold conditions to suggest how quickly an asset will move

Stochastic oscillator

compares a security’s closing price to its price range over a specific period. It helps identify overbought and oversold levels and potential trend reversals

Best Trading Platforms for Scalp Traders

eToro

Popular for Forex and scalp trading, eToro has a wide range of capabilities. The platform offers commission-free stock and ETF scalping, allows leverage, and supports cryptocurrencies and commodities

CenterPoint Securities

Known for speedy and efficient transactions, CenterPoint provides direct access to markets and a small commission of $0.003 per share traded

Moving averages

display levels of support and resistance to predict directional changes

Tradestation

Tradestation provides direct access to markets and numerous advanced trading tools.
You’ll likely learn how to scalp trade and pinpoint the best scalping strategy for you on a broker’s platform, so choosing one with low costs and various capabilities is important.

High Performance Trading Computers

Your scalp trading setup should enhance your knowledge and capabilities, not hold you back. Having a setup with high processing power and multiple monitors allows traders to monitor multiple stocks and indicators at once, boosting efficiency and analytical faculty.
Trading laptops offer portability and speed, ideal for those who travel frequently and need to trade in multiple locations. On the contrary, desktops allow for multi-screen setups and customization, providing more options to a scalper trader. Check out our Falcon Trading Computer reviews to see what real traders think of our computers.
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Bottom Line

To recap on the scalping meaning: scalping is a trading strategy that involves capitalizing on small price fluctuations by making quick trades repeatedly throughout the day. Scalpers can implement popular trading strategies like Bollinger Bands or MACD indicators. They can also implement similar tactics to scalp crypto or Forex.
In the fast-paced world of scalping, having the right tools is crucial. Falcon Trading Computers provide the best bang for buck, allowing traders to unleash their full potential with powerful computers. Don’t settle for subpar. Invest in a Falcon computer today and navigate the fast-paced trading world with confidence and top-tier equipment.