What is scalping?
Scalping is another way to trade. With scalping you keep your positions open for a maximum of two minutes. You open a position on a stock – Shell, for example – to almost instantly sell it for a small profit.
How does scalping work?
With scalping you try to take small profits from the tiniest fluctuations on the market. You do this using leverage. The price of a stock normally fluctuates slightly during those two minutes. Scalpers try to profit from these tiny price movements.
When the price of a stock is set to $5, and you want to make a tiny profit as a scalper, you can open your position and close it at 5.01 pounds. Scalpers are often focussed on these tiny price changes and don’t keep positions open for a long time.
Is scalping allowed?
Scalping is completely legal in some countries and fully illegal in others. Brokers could also decide to forbid scalping. With the broker Plus500 scalping isn’t allowed. When you do want to scalp, it’s best to try broker Markets.com. This broker isn’t against scalping.
Why scalping is difficult
Scalping is very difficult. Since you only make a tiny profit for each trade, you need to trade a lot to make a decent amount of money. And for every position you pay a transaction fee. These fees put a dent in your already modest profits.
Professional scalpers are so good at opening and closing positions that they can do ten to twenty trades every hour. By opening and closing positions really fast based on technical analysis, for example, it’s possible to make even more money than trading the traditional way.