Scalping is one of the fastest-paced trading strategies. Scalpers aim to profit from tiny price movements, holding positions for just seconds to minutes. If you thrive on quick decisions and fast action, scalping might be your style.
What is Scalping?
Scalping is a day trading strategy where traders make many small trades to capture tiny profits. Instead of waiting for a stock to move $1, a scalper might take 10 trades targeting $0.10 each.
Key characteristics of scalping:
- Trade duration: Seconds to minutes
- Profit target: $0.05 to $0.25 per share typically
- Number of trades: 20-100+ per day
- Win rate target: 60-80% or higher
- Position size: Larger than swing trading
The scalping math: If you make 50 trades per day with a 65% win rate, averaging $0.10 profit on winners and $0.08 loss on losers, trading 500 shares: (32.5 wins x $50) - (17.5 losses x $40) = $925/day potential.
Requirements for Scalping
Capital and Account Type
- Minimum $25,000: PDT rule requires this for frequent day trading
- Margin account: Allows 4x buying power for day trades
- Low commission broker: Commissions eat into small profits
Technology and Tools
- Fast execution platform: Delayed fills kill scalping profits
- Level 2 quotes: See the order book for entry timing
- Time and sales: Watch actual trade prints
- Hot keys: Quick order entry is essential
- Stable internet: Any lag costs money
Mental Requirements
- Quick decision-making ability
- Emotional control under pressure
- Ability to cut losses instantly
- Focus for extended periods
- Discipline to follow rules
Scalping Strategies
1. Bid-Ask Spread Scalping
The simplest form of scalping involves capturing the spread between bid and ask prices:
- Buy at the bid price
- Sell at the ask price
- Profit is the spread minus commissions
- Requires very liquid stocks with tight spreads
2. Breakout Scalping
Trade micro-breakouts on short timeframes:
- Watch for consolidation patterns on 1-minute charts
- Enter when price breaks out with volume
- Take profit quickly - do not wait for extended moves
- Stop loss just below the breakout level
3. Momentum Scalping
Ride quick momentum moves in trending stocks:
- Find stocks with strong pre-market momentum
- Enter on pullbacks in the direction of the trend
- Exit when momentum pauses
- Re-enter when momentum resumes
4. Range Scalping
Trade between support and resistance on quiet stocks:
- Identify stocks in a tight trading range
- Buy at support, sell at resistance
- Works best during low-volatility periods
- Stop loss just outside the range
Strategy tip: Most successful scalpers specialize in just one or two setups. Master one strategy completely before adding others.
Scalping Risk Management
Risk management is critical for scalpers because of the high trade volume:
Position Sizing
- Risk no more than 0.5-1% of account per trade
- Use consistent position sizes for easier tracking
- Larger positions require tighter stops
Stop Losses
- Always use stops - no exceptions
- Stops should be proportional to targets (1:1 or better risk/reward)
- Mental stops require perfect discipline - use hard stops instead
Daily Limits
- Set a maximum daily loss (2-3% of account)
- Set a daily profit target (optional)
- Stop after 3 consecutive losses to reassess
Best Stocks for Scalping
Not all stocks are suitable for scalping. Look for:
- High volume: At least 1 million shares daily average
- Tight spreads: Penny-wide spreads or better
- Volatility: Stock should move, but not too erratically
- Price range: $10-100 typically works best
- Clean charts: Avoid stocks with erratic price action
Popular scalping stocks include large-cap names like AAPL, MSFT, NVDA, AMD, and TSLA. These have excellent liquidity and consistent price action.
Scalping vs Other Day Trading Styles
Scalping
- Hold time: Seconds to minutes
- Trades per day: 20-100+
- Profit per trade: Small
- Win rate needed: High (60%+)
- Stress level: Very high
- Screen time: Constant
Regular Day Trading
- Hold time: Minutes to hours
- Trades per day: 3-10
- Profit per trade: Medium
- Win rate needed: Moderate (50%+)
- Stress level: High
- Screen time: Active hours
Common Scalping Mistakes
- Overtrading: Taking low-quality setups out of boredom
- Holding losers: Hoping a losing scalp will come back
- No stops: One big loss wipes out many small wins
- Wrong stocks: Scalping illiquid stocks with wide spreads
- Ignoring commissions: Not accounting for trading costs
- Revenge trading: Trying to recover losses immediately
- Fatigue trading: Trading tired leads to mistakes
Scalping Setup Checklist
Before taking any scalp trade, confirm:
- Stock is on your watchlist (do not chase random stocks)
- Volume is above average
- Spread is acceptable (penny-wide or less)
- Clear entry and exit levels identified
- Risk/reward is at least 1:1
- You are focused and alert
- Daily loss limit not reached
Track Every Scalp Trade
Pro Trader Dashboard automatically tracks all your scalp trades and calculates your true profitability after commissions. See which setups actually work.
Summary
Scalping offers the potential for consistent daily profits through many small trades. Success requires fast execution, strict discipline, and proper risk management. Start with paper trading to develop your skills without risking capital, and only scalp with real money once you are consistently profitable in simulation.
Want to explore other strategies? Learn about momentum trading or discover proven day trading setups.