Scalping
Take many small profits from tiny price movements throughout the day. Demands speed, low transaction costs, and emotional discipline above all else.
Thesis
Take many small profits from tiny price movements throughout the day. The math works only when win rate is high, average winner exceeds average loser net of costs, and execution is fast enough to capture and exit opportunities before they close. Scalping is less a strategy than a discipline.
Entry Rules
- Trade only during high-liquidity sessions: the first and last hour of the major exchanges, around major news.
- Use lower timeframes — one-minute, five-minute, or tick charts.
- Look for small-scale patterns: range breaks, level reactions, order flow imbalances.
Exit Rules
- Predefined small profit targets, often a few ticks or pips.
- Tight stops — typical loss should not exceed one to two times the profit target.
- Time-based exit if price stalls without resolving.
When It Works
- Highly liquid markets with tight spreads (major futures, top-tier forex pairs, large-cap equities).
- Volatile but orderly conditions where moves trend within the session.
- For traders with low transaction costs and excellent execution infrastructure.
When It Fails
- Wide-spread or low-liquidity instruments where costs eat into thin margins.
- News events that cause rapid stop-outs in both directions.
- Mentally fatigued sessions — scalping demands sustained focus that few can maintain for hours.
Common Mistakes
- Trading through high-spread periods (overnight, midday lulls, immediately pre-news).
- Ignoring the cost-per-trade math — a string of small winners can be a net loss after fees and slippage.
- Revenge trading after small losses, breaking position-size rules.
- Underestimating the mental cost. Most discretionary scalpers burn out within months.