The term “scalping” has traditionally been associated with people standing outside of sporting events or concerts, waving tickets in the air and calling for anyone who might be interested in buying for supposedly under-market value at last minute. Legitimate ticket brokers have often garnered the scalper label for their willingness to purchase tickets and resell them at a high mark-up. In general, ticket scalping and those who perpetuate it, carry a negative stigma in society as a whole, despite the usefulness and widespread employment of their services through the years. In light of this, what does it mean to scalp a stock?

Stock scalping is the philosophy of investing in which the primary focus is building up a large number of smaller gains for the purpose of making a lot of money overall. To this end, the investor who decides to scalp stocks retains possession of their stocks for a very limited term, reselling the stock when the value increases even the smallest amount.

Scalping also applies to the practice of dropping one’s shares if the value dips below a point with which the trader is comfortable. Scalpers understand that the value of a stock will not continue to increase in perpetuity. Therefore, they limit their risk and their potential for loss by unloading the stock before it has a real chance to depreciate again.

This stands, however, in stark contrast to the mainstream view of stocks and investing. The majority of traders are in the stock game with an eye toward the long-term and want to construct a nice portfolio with a diverse array of investments that they hope to retain for as long as possible. This is one way to squeeze the most profit out of a single stock and increase the traders return on investment (ROI).

Investors who take up scalping, on the other hand, hold a stock for the short-term. They tend to sell the stock again, a few days later at the latest, or within a few seconds at the earliest. Such an unorthodox method of trading underscores the scalper’s lack of interest in earning a huge return from one stock, but rather their attempts to make incremental gains from price fluctuations across several investments.

The potential to make a living from stock scalping varies depending on the trader. If an investor enjoys a high net worth, more they will probably be able to afford a greater number of investments than a trader who is just dipping their toes in to the water, so to speak. The former type of trader can buy up so many shares of so many different types of stocks that they are essentially adding extra buffers against loss in the event that some of their stocks lose value.

The trader with a modest to average net worth, however, will probably need to resign themselves to a small sampling of stocks from one or two companies. From there, they would save their earnings in order to reinvest in other stocks. Assuming the trader makes wise investments, this cycle would repeat itself and the modest investor will gradually and steadily increase their earnings.

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