Trading strategies
Scalping
Definition
Scalping is the shortest trading style: positions last from seconds to a few minutes and aim for small moves, sometimes a few cents a share. Spreads, commissions and slippage take a large bite out of each trade, so scalpers stick to the most liquid stocks.
Example
Say a scalper tries to capture a 4-cent move on 1,000 shares, worth $40. Buying at the ask and selling at the bid of a stock with a 1-cent spread gives up $10 of that, and $6 of commissions and fees leaves $24, so 40% of the move is gone. With a 5-cent spread, the $50 spread cost alone would be larger than the whole move.
Hypothetical numbers, for illustration only.
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