Scalper

What Is a Scalper?

Scalpers enter and exit the financial markets quickly, usually within seconds, using higher levels of leverage to place larger-sized trades in the hopes of achieving greater profits from minuscule price changes.

A scalper, in the context of market supply-demand theory, also refers to a person who buys large quantities of in-demand items, such as new electronics or event tickets, at regular price, hoping that the items sell out. The scalper then resells the items at a higher price. For example, a scalper may buy 10 tickets to the Super Bowl and attempt to sell them on eBay several days before the game at an inflated price. This type of scalping is illegal under certain conditions and such transactions often occur on the black market.

Understanding a Scalper

Scalpers buy and sell many times in a day with the objective of making consistent profits from incremental movements in the traded security's price. A scalper attempts to profit from the bid-ask spread in addition to exploiting short-term price moves. They may trade manually or automate their strategies using trading software.

High-frequency trading (HFT) has made a scalper’s job more competitive. Programs can scour thousands of securities at once and take advantage of discrepancies between the bid and ask in milliseconds. Black box algorithms also monitor level 2 data, analyzing price and liquidity information to make short-term trades.

Scalpers typically use short duration, such as one- and five-minute, charts to make their trading decisions. They may also purchase intraday scanning software to find new opportunities. Most scalpers engage in high volume trading and use online brokers that offer competitive commissions to keep their trading costs to a minimum.

Traits of a Scalper