Definition:

A scalper is an investor who buys and sells financial assets rapidly, primarily for profit from short-term price fluctuations. Scalpers typically employ high-frequency trading (HFT) techniques to execute trades at lightning speeds and exploit fleeting market inefficiencies.

Key Characteristics:

• High-frequency trading: Scalpers use sophisticated algorithms and software to execute trades at extremely rapid speeds, often in milliseconds or microseconds.
• Short-term holding: Scalpers typically hold assets for a very short period, usually only a few seconds or minutes, and exit when they see an opportunity to profit.
• Profittaking from price fluctuations: Scalpers profit from the differences in prices between the time they buy and sell assets.
• Use of technical analysis: Scalpers often rely on technical analysis tools to identify potential price movements and timing their trades.
• High risk: Scalping involves a high degree of risk, as the profits can be significant but so can the losses.

Types of Scalping:

• Day trading: Scalpers who trade assets during the same day and exit all positions before the market closes.
• Swing trading: Scalpers who hold assets for a longer period than day traders but still maintain a relatively short holding time.
• High-frequency arbitrage: Scalpers who exploit price discrepancies between different markets or exchanges.

Examples:

• A trader who buys and sells stocks in quick succession, taking profit from the price fluctuations.
• A bot that automatically trades foreign exchange contracts based on technical analysis signals.
• A high-frequency trading firm that exploits market inefficiencies to make a profit.

Regulations:

Scalping activities are subject to regulations by financial authorities, such as the Securities and Exchange Commission (SEC) in the United States. These regulations aim to prevent manipulative trading practices and protect investors.