Broadly speaking, there are three main strategies that scalpers employ:
- High-volume trading – Scalpers will often buy in large quantities to make the most of a small move, sometimes just a couple of points. As mentioned previously, this approach requires enough liquidity for the full position to be opened and closed effectively and with a tight spread
- Breakout trading – Most scalping trading strategies will involve looking for breakouts, positioning your entry to a trade at the start of a breakout and riding the market move until the first exit signal is given off. This strategy is probably the most approachable, given it’s used across trading styles
- Trading the spread – Also known as market making, this is a strategy where scalpers attempt to profit on the spread itself by simultaneously buying and selling an asset. It relies on a market being relatively stable but still popular enough to experience deep liquidity. This is the most difficult strategy as the trader will be going up against much larger institutions and market makers
While most traditional scalping techniques are based on going long, a realm of opportunities can be opened up by going short too – especially when it comes to market-making strategies that involve buying and selling.
You can go long and short using derivative products, such as CFDs, options and futures.