What Is Scalping?

What Is Scalping?

By Charles Joseph | Editor, Financial Affairs
Reviewed by Corey Michael | Senior Financial Analyst

Scalping is a trading strategy used in the forex and stock market. Traders who implement this strategy are known as scalpers. The main objective of scalping is to make a profit through purchasing or selling currencies or stocks by holding a position for a very short period of time and closing it for a small profit. Many trades are made throughout the trading day and the system that is used by these traders is a high leverage, usually this strategy is implemented to accumulate larger profits from slightly price changes in the market.

Related Questions

1. What is the main advantage of scalping?

The main advantage of scalping is the ability to make a profit even when the overall market conditions are not clear. Scalpers can benefit from small market movements, many times a day, due to the high number of trades being placed.

2. What are the risks of scalping?

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Scalping has its risks as it requires a lot of attention, quick decision making and execution. Further, it involves the use of high leverage which means potential for larger losses. Sudden market changes can also cause substantial losses.

3. What skills are required for scalping?

Scalping requires a great understanding of the market and good analytical skills. Some other important aspects are quick decision-making abilities, attention to detail, and the ability to stay focused for long periods of time.

4. What type of traders are inclined to use scalping strategies?

Traders who have the ability to make quick decisions, who can stay focused and work quickly under pressure are most likely to use scalping strategies. Scalpers need to be able to react quickly to changing market conditions and to be comfortable with high-risk, high-reward trading.

5. Can scalping be used in all market conditions?

No, scalping is best used in certain market conditions. Stable markets with high volumes and liquidity are the most suitable for scalping. In comparison, volatile markets with uncertain directions are not ideal for this trading strategy.