What is Scalp Trading: How does Scalping Work | Motilal Oswal

What is Scalp Trading: How does Scalping Work

New traders can reach a point of confusion while deciding which style of trading to practise. Yes, there are styles. Depending on your individual personality, you should choose a style that matches. You need to have a technique in place, and this should correspond with your financial aims, tolerance of risk, time to spend on investments, plus other factors. Scalping is one particular style that you can consider adopting when you start out. It helps you get the feel of trading. Scalping meaning simply refers to undertaking many small deals during a market day, with the goal of making a profit. 

  • What is Scalp Trading?

People who adopt the style of scalp trading are called ‘scalpers’. How do they earn money from the deals they cut? First, this is a style of trading that is undertaken in order to earn money from small fluctuations in price. All the small amounts finally add up to make a substantial gain. Keeping the frequency up, scalpers trade in a number of small successive deals. With a stringent exit plan, the scalp trader has to be strict about deals as a single large loss may wipe out several small profits made in other trades. Scalp trading strategy, thus, requires self-discipline and a huge amount of will. With qualities such as these and the right fundamentals, it's not a challenge to have success as a scalp trader. This trading style is a motivating style as it offers traders the thrill of stock market trading. 

  • How Does it Work?

Once you have scalp trading meaning sorted out, you should understand how it actually works. The trading technique is a short-term one as you seek to make daily profits. It involves you buying and selling many times a day, earning you profit from differences in prices. Buying an asset at a lower price and selling it when it goes up, is what scalping strategy aims at. It is vital that you discover highly liquid assets that give you price fluctuations often throughout the day. If the asset is not a liquid asset, you will not be able to scalp. What liquidity assures you of is the ideal price while you enter or exit the marketplace. 

  • Small, Quick and Regular

Scalping traders feel it's simpler to make small deals that are reduced in risk. From the perspective of market volatility, this makes a lot of sense. You make a small profit while the going is good, before your opportunity disappears. Scalp traders who indulge in online stock trading are on the other side of the trader spectrum, where you have traders who hold onto promising stocks, often waiting months to see some profit. Scalpers create multiple small profits instead of a large bundle, within a limited time frame. If you want to minimise market risk, lowering your exposure and being happy with smaller (and quicker) profit margins, scalping is the right choice for you. 


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