Scalp trading works by buying and selling large quantities of an asset, but only holding the position for a short period of time.
Scalp traders would either go long by buying low and selling high, or go short by selling high and buying low. Having both avenues of profit enables scalp traders to find a much wider range of opportunities across rising and falling markets.
To make enough profit from such small movements, pure scalpers would be entering dozens, if not hundreds, of trades each day. This means they’ll need to dedicate a lot of time to monitoring financial markets, so it’s very rarely a style of trading adopted by beginners or part-time traders.
Due to the amount of work a successful scalping strategy takes, it can be more cost and time effective to use a computer program. This guarantees speed when it comes to entering and exiting positions and reduces the risk of trading based on emotions and biases. Scalp trading can work manually, with traders making their own decisions about when and what to trade, but usually scalp traders choose to automate their trading strategy.
Ultimately though, scalp trading looks different depending on the market you’re interested in. Let’s take a look at two of the most common asset classes: stocks and forex.