Scalping is a common trading strategy that involves the purchase and sale of assets within a day with the aim of making profits from the price differences. In this blog post, we will give a clear meaning of what scalping is in trading, how the strategy is used and give an example of a scalping trade.
Definition of scalping in trading
Scalping is the process of buying and selling financial instruments with the aim of making profits from the price differences in the market. Leverage is usually used when implementing the strategy to increase the returns that can be gained. Scalpers make a lot of small trades in a short period of time and generally keep each position for a few minutes or even seconds.
On The Origins of Scalping
There is no clear cut history of when and where the scalping strategy started but it is thought to have been in existence for many years in the different markets. The term ‘scalping’ is said to have been derived from the practice of scalping tickets where people would buy tickets at the face value and then try to sell them at a higher price. In the market, scalping means the act of buying and selling financial instruments in order to make a profit from the price differences. Scalping has been in existence as a trading strategy in the stock market for several decades now especially after the development of electronic trading. Scalping in the forex market picked up momentum in the 1990s due to the development of online trading and margin trading.
Scalping is used in different markets across the globe, including the stock market, foreign exchange, and cryptocurrencies. Although scalping is a very profitable trading strategy, it is not without its risks and should not be attempted by every trader. This kind of trading requires that the trader is always available in the market and make decisions quickly, and it can be a nerve-racking activity. It is, therefore, advisable to seek the advice of professionals before getting involved in scalping as the risks and potential gains are fully understood.