What Is Scalp Trading?
Scalp trading, or scalping, refers to a short-term trading technique whereby traders aim to extract short-term profits from regular stock price fluctuations. Scalpers generally do not concern themselves with the overall direction of the market or the trend of the stock they trade as long as they can make a quick profit.
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Rationale
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Most stocks can fluctuate as much as 5 percent in a given day; few go on to become “tenbaggers” (rise tenfold). Statistically, a trader is much more certain to make a profit from short-term fluctuations of many stocks than by finding a tenbagger.
Scalping for Points
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Scalping is an old term that existed long before day trading. Scalpers used to hunt for “points”--a point meaning a dollar. Some used to scalp for “teenies”–a term that was used when stocks traded at 1/8 of a dollar or even 1/16 of a dollar.
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Time Frames
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Scalping is a form of short-term trading but, unlike day trading, it does not necessarily call for closing out all positions at the end of each day. The goal is simply to scalp for a point in as little time as possible–an hour, a day, a week—wherever and whenever you can find it.
Strategies
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Scalpers might use different tools: intraday charts or patterns, observation, market psychology and special situations. Not all scalpers scalp all the time. Many swing traders trade around their core positions on short-term opportunities that are “good for a scalp.”
Advantages
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Scalpers do not have to concern themselves with fundamental analysis. Often they don’t even care what a company does, or even what it’s called, going just by the symbol. All they care about is short-term setups from which they can extract a quick profit.
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