Scalping Stocks
Scalping stocks is a fast-paced trading strategy that targets small market changes to accumulate profit. In this article, we review the definition of scalping, what it means in stocks trading, the various strategies available, and how to get started. We also list the best brokers for scalping stocks.
Scalping Stock Brokers
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Founded in 2002 in Poland, XTB now serves more than 935,000 clients. The forex and CFD broker combines a heavily regulated trading environment with an extensive selection of 5,600+ assets and a commitment to trader satisfaction, featuring an intuitive in-house platform with superb tools to support aspiring traders.
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Established in 1989, CMC Markets is a respected broker listed on the London Stock Exchange and authorized by several tier-one regulators, including the FCA, ASIC and CIRO. More than 1 million traders from around the world have signed up with the multi-award winning brokerage.
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Eightcap is an award-winning, FCA-regulated broker offering industry-low trading fees. They are also the highest-rated brand by TradingView’s 50 million-strong users, who can trade directly on the platform. UK traders can sign up for a live account with an accessible £100 minimum deposit.
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FXCC is an established broker that’s been offering low-cost online trading since 2010. Registered in Nevis and regulated by the CySEC, it stands out for its ECN trading conditions, no minimum deposit and smooth account opening that takes less than 5 minutes.
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Spreadex is an FCA-regulated broker that offers spread betting opportunities on an impressive 10,000+ CFD instruments including 60 forex pairs. Traders can also take short-term positions on sporting events. The brand has been around for over 20 years and has won multiple awards.
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Established in Australia in 2010, Pepperstone is a top-rated forex and CFD broker with over 400,000 clients worldwide. It offers access to 1,300+ instruments on leading platforms MT4, MT5, cTrader and TradingView, maintaining low, transparent fees. Pepperstone is also regulated by trusted authorities like the FCA, ASIC, and CySEC, ensuring a secure environment for traders at all levels.
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Interactive Brokers (IBKR) is a premier brokerage for experienced traders, providing access to 150 markets in 33 countries, along with a suite of comprehensive investment services. With over 40 years of experience, this Nasdaq-listed firm adheres to stringent regulations by the SEC, FCA, CIRO, and SFC, amongst others, and is one of the most trusted brokers for trading around the globe.
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IC Markets is a globally recognized forex and CFD broker known for its excellent pricing, comprehensive range of trading instruments, and premium trading technology. Founded in 2007 and headquartered in Australia, the brokerage is regulated by the ASIC, CySEC and FSA, and has attracted more than 180,000 clients from over 200 countries.
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XM is a globally recognized forex and CFD broker with 10+ million clients in 190+ countries. Since 2009, this trusted broker has been known for its low fees on 1000+ instruments. XM is regulated by multiple financial bodies, including the ASIC and CySEC.
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DNA Markets is a forex and CFD broker established in 2020. The broker operates two entities in Australia and the offshore jurisdiction, St Vincent and the Grenadines. Traders can access 250+ markets, with a Standard account for beginners and a Raw account for experienced traders. The reliable MetaTrader 4 and MetaTrader 5 platforms are available, alongside Signal Start.
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Founded in 1999, FOREX.com is now part of StoneX, a financial services organization serving over one million customers worldwide. Regulated in the US, UK, EU, Australia and beyond, the broker offers thousands of markets, not just forex, and provides excellent pricing on cutting-edge platforms.
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RoboForex is an online broker, established in 2009 and registered with the IFSC in Belize. Traders can choose from five accounts (Prime, ECN, R StocksTrader, ProCent, Pro) catering to different needs with trades from 0.01 lots and spreads from 0 pips. RoboForex has also enhanced its offering over the years, adding CFD instruments and launching its stock trading platform, plus the CopyFX system.
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OANDA is an award-winning global broker, established in 1996. The hugely respected brand offers competitive trading accounts and serves clients from 196 countries. It remains a popular option with both beginners and experienced traders thanks to its user-friendly and sophisticated web platform, no minimum deposit and premium currency products and services. The company is also overseen by reputable regulators, including the FCA, ASIC and CIRO.
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Trade Nation is a top FX and CFD broker regulated in multiple jurisdictions including the UK and Australia. The firm offers low-cost fixed and variable spreads on 1000+ assets with robust trading platforms and training materials. The Signal Centre can also be used for trade ideas.
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Founded in 1974, IG is part of IG Group Holdings Plc, a publicly traded (LSE: IGG) brokerage. The brand offers spread betting, CFD and forex trading across an almost unrivalled selection of 17,000+ markets, with a range of user-friendly platforms and investing apps. For 50 years, IG has maintained its position as an industry leader, excelling in all key areas for traders.
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Founded in 2009, Vantage offers trading on 1000+ short-term CFD products to over 900,000 clients. You can trade Forex CFDs from 0.0 pips on the RAW account through TradingView, MT4 or MT5. Vantage is ASIC-regulated and client funds are segregated. Copy traders will also appreciate the range of social trading tools.
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Founded in 2006, FxPro is an established forex, CFD and spread betting broker offering 2100+ assets to over 2 million clients worldwide. The broker is regulated in 4 jurisdictions and offers reliable 24/5 customer support, earning it a high trust and safety score. FxPro has also picked up more than 100 industry accolades for its competitive trading conditions, including fast execution and deep liquidity.
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Fusion Markets is an online broker established in 2017 and regulated by the ASIC, VFSC and FSA. It is best known for its low-cost forex and CFD trading, although its multiple account types and copy trading solutions cater to a range of traders. New clients can sign up and start trading in 3 easy steps.
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GO Markets is an established forex and CFD broker with multiple industry awards and accolades. The ECN/STP broker is popular with budding traders, offering competitive accounts in multiple base currencies and a range of flexible payment methods. With top-tier regulation from CySEC and ASIC, GO Markets is a trusted broker.
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Axi is a global forex and CFD trading firm, founded in 2007 in Sydney, Australia. Highly leveraged trading opportunities plus a $0 minimum deposit make it a popular choice among 60,000+ traders worldwide. Axi also stands out for its resources, including copy trading and Autochartist.
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EagleFX is a forex and CFD broker, established in 2019. The broker uses STP execution on the MT4 platform, offering tight spreads and low commissions. With leverage up to 1:500 and no restrictions on hedging or scalping, EagleFX is an attractive option for short-term traders.
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Tradeview is an offshore forex and CFD broker based in the Cayman Islands and regulated by CIMA. Traders can access over 5000 instruments with a minimum deposit of $100. There are several third-party platforms on offer, including MetaTrader 4 (MT4) and cTrader.
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Founded in 2010, ThinkMarkets is a reputable CFD and forex broker with regulation from several top-tier bodies including the FCA and ASIC. The broker provides services to over 450,000 accounts from 11 global offices. Traders can use a bespoke platform, MT4 or MT5 to access a wide variety of assets including 3500+ stocks and ETFs, 46 forex pairs and over 20 cryptocurrencies.
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Grand Capital is a MetaTrader broker with welcome bonuses, trading competitions and an intuitive copy trading service. Several account types and 400+ assets provide trading opportunities for various types of investors and strategies. New users can also open an account and start trading in a matter of minutes.
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IronFX is a multi-regulated forex and CFD broker founded in 2010. This award-winning firm offers 500+ markets to over 1.5 million clients across 180 countries. Traders can access various account types with competitive pricing on the MT4 platform, as well as 24/5 customer support in 30 languages.
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Ingot Brokers is a multi-regulated brokerage established in 2006. The broker offers CFD trading opportunities on 1000+ instruments including forex, stocks, indices, commodities and cryptocurrencies. The broker supports the MetaTrader 4 and MetaTrader 5 platforms and offers both raw spreads and commission-free account options.
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Dukascopy is an online broker operated by a Swiss-regulated banking group. It offers a good selection of 500+ markets, with forex, stocks, gold, ETFs, indices, bonds and cryptocurrencies available. It also offers flexible trading opportunities through the choice of CFDs or binary options. Traders will use MetaTrader 4 or a proprietary platform that is well-suited to automated trading.
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FinPros is an offshore broker that provides CFD trading on 400+ instruments with high leverage up to 1:500. This is a reliable bet for traders seeking offshore options, with strong security measures, negative balance protection and segregated client funds. The extra features including trading tools and commission-free stocks make this a good choice for beginners, and experienced traders will appreciate tight spreads.
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FXTM is a top-rated forex and CFD broker established in 2011 and operating across 4 continents. The company is secure and regulated by leading authorities, including the FCA and CySEC. Offering 1000+ trading markets and three account types, they cater to all levels of trader.
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ForexChief is a foreign exchange and CFD broker, established in 2014. The company is based offshore and registered with the VFSC and FMA. Users can choose between a wide selection of accounts and base currencies, making ForexChief accessible to global traders. The brand also stands out for its no deposit bonus and fee rebates for high-volume traders.
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SageFX is an offshore, unregulated CFD broker that offers highly leveraged trading on forex, stocks, commodities, indices and crypto via the TradeLocker platform. Traders can access commission-free trading or an ECN account with tight spreads. While the broker's regulatory status is weak, it does provide segregated accounts and two-factor authentication.
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SimpleFX is an online broker specializing in CFD and cryptocurrency trading, with multi-currency accounts, STP execution, low pricing and no minimum deposit. Bringing innovation and gaining recognition at numerous industry events since 2014, SimpleFX now caters to retail traders from over 190 countries, boasting a client base exceeding 200,000 active users.
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Swissquote is a Switzerland-based bank and broker that offers online trading and investing. The company has a high safety score and is listed on the Swiss stock exchange. The firm offers a huge range of products, from stocks, ETFs, bonds and futures to 400+ forex and CFD assets. Hundreds of thousands of traders have opened an account with the multi-regulated brokerage. Clients can get started in three easy steps while 24/7 customer support is available to assist new users.
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FXPrimus is an award-winning CySEC-regulated brokerage offering CFD trading on 200+ instruments via the MetaTrader 4, MetaTrader 5 and cTrader platforms. The choice between a competitive commission-free account and two affordable raw spread options make this an accessible broker for anyone seeking forex, stocks, indices and commodities with high leverage.
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FP Markets is an ASIC- and CySEC-regulated broker that offers forex and CFD trading on a broad range of assets through the MT4, MT5 and IRESS platforms. With trading available through standard and raw spread accounts on thousands of international stocks, forex, indices, commodities, cryptocurrencies, bonds and ETFs, this broker has some of the most comprehensive market coverage available. FP Markets also offers a full range of additional features, including educational resources and access to powerful software such as Autochartist.
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Admirals is an FCA- and ASIC-regulated broker with an excellent range of leveraged instruments, including forex, stocks, indices, ETFs, commodities, cryptos and more. The broker supports the MetaTrader 4, MetaTrader 5 and TradingCentral platforms. With both spread betting and CFDs available and thousands of instruments, this broker provides more flexibility than most rivals.
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Infinox is a UK-based and FCA-regulated broker that offers diverse trading products thanks to its STP and ECN account types and support for MetaTrader 4, MetaTrader 5 and a proprietary platform. Clients can also benefit from a free VPS that can support automated strategies and a social trading platform, catering to both beginner and seasoned traders.
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OspreyFX is an ECN broker headquartered in St. Vincent and the Grenadines. Established in 2019, the firm offers 120+ forex and CFD assets with high leverage up to 1:500, tight spreads from 0.1 pips and round-the-clock customer support. OspreyFX also stands out for its funded trading accounts where traders can keep up to 70% of profits.
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AdroFx is an offshore ECN/STP broker that has offered CFD trading since 2018. The firm supports 100+ tradable assets on the popular MetaTrader 4 platform as well as a web trader, Allpips. Eight live accounts are available with no restrictions on trading strategies.
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Coinexx is an unregulated broker that provides leverage up to 1:500 on forex, commodities, indices and cryptocurrencies with deep liquidity, pure ECN spreads and negative balance protection. The broker uses crypto as base currencies and has low minimum deposit requirements of 0.001 BTC.
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Amega is an offshore STP broker offering CFD trading on forex, stocks, indices and commodities with very high leverage up to 1:1000 and a zero-commission pricing structure. Traders access markets through the MT5 platform and can test the broker's services through a demo account.
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Just2Trade is a reliable multi-regulated broker registered with FINRA, NFA and CySEC. The company has 155,000 clients from 130 countries and stands out for its huge suite of instruments and additional features, including a social network, robo advisors and a funded trader programme.
What Is Scalping Stocks?
Scalping stocks is a short-term trading strategy. It involves targeting minor changes in intraday stock prices and moving in and out of positions regularly to build profit. These tiny market shifts happen frequently on a day-to-day basis, even in exchanges that have little fluctuation, and so these small windows of opportunity are common and profitable. Scalping stocks can be your main trading strategy or used to supplement another technique.
Stock scalpers make numerous speedy trades, holding positions for very short periods of time, sometimes seconds, making multiple small wins before the market changes. Big wins are not the goal. Scalping stocks is appealing to investors who can devote time to monitoring markets and acting quickly—some even scalp stocks for a living.
During an average trading day, stock scalpers can make hundreds of trades meaning the size of wins may be small but the win to loss ratio is improved. However, as a result of making a large volume of trades, commission and fees can often build up, reducing total profit. Any trade can be turned into a scalp by taking a profit near the 1:1 risk-reward ratio.
Scalping Stocks Vs Day Trading Stocks
Scalping stock strategies are different from traditional day trading where positions are held for longer periods of time with the aim being to make more profit from each trade. Investors would normally hold a position, resisting exiting too early, therefore maximising their earning potential. However, the opportunity for bigger losses is increased in normal day trading as the longer you stay, the greater the risk that trades won’t stay in profit.
Scalping stocks adopts the opposite mindset. Scalpers holds positions for much shorter timescales—seconds or minutes rather than hours—especially in the case of micro-scalping where timescales can be reduced to 10-20 seconds.
In addition, scalping stocks depends on higher volumes and increased leverage compared to day trading, allowing investors to make a profit in shorter periods.
Scalping Stocks Strategies
There is an abundance of online resources for scalping stocks strategies, including YouTube videos of live tutorials and discussions on various forums. We have explained a few scalping strategy examples below too.
Scalping stocks is more frequently done using technical analysis, using various indicators to spot patterns and make stock price forecasts. By predicting trends, investors can make decisions as to whether the risk-reward ratio is appropriate. Fundamental analysis can also be useful by monitoring external market events to help you identify hot stocks.
Stochastic Oscillator
Scalping stocks using a stochastic oscillator aims to capture momentum in markets. By comparing the current price of a security to its recent price range, this indicator attempts to predict turning points. Prices tend to close near the extreme of the recent range.
This indicator is used to generate trading signals, using values between 0 and 100 to indicate whether a market is trading above or below its true value. For example, a value of 80 or more is considered to be overbought whereas a value under 20 would be seen as oversold.
Stochastic Indicator
The current value of the stochastic indicator is sometimes referred to as the fast indicator. The slow indicator is taken as a 3-day moving average of the fast indicator. Transaction signals are created when these two indicators cross, suggesting a reversal.
- Downward trending high stochastic indicators provide entry points for short positions while upward trending low stochastic indicators provide entry points for long positions. The stochastic indicator can be used in tandem with the moving average indicator (see below), by only trading when the stochastic indicator is in the same direction as the trend according to the moving average.
- If the stochastic oscillator trend continues into more than 80 or under 20 (the oversold or overbought areas), sell the position.
Moving Averages
One simple method of scalping stocks is to use moving averages (MA) to indicate trends in equities. It sums up data points of a security over a specific time period and divides it by the total number of data points. It is continually recalculated based on the latest price update. The indicator removes noise from the chart i.e. frequent short-term fluctuations and smooths out prices by updating the average over a specific period of time.
Moving averages
For example, select a 200-day period moving average to indicate an overall trend. You then select a short-term MA and a longer-term one, such as 5 day and 20-day periods, which will show you whether to buy or sell. The best timescale for this scalping stocks strategy would be 1 minute or 5 minutes.
- If the 5-day moving average crosses above the 20-day one, enter positions in the same direction as that trend (i.e. as indicated by the 200-day MA)
- If the moving averages cross each other back (i.e. the 5-day MA crosses below the 20-day one), sell the position
Market Making
Market making is an advanced stock scalping tactic where traders capitalise on the bid-ask spread by putting out a bid and making an offer on the same stock at the same time. This strategy works best with stocks that are not showing any real-time price changes. Difficulties arise because of competition with other market makers for the shares on bids and offers.
Find out more about scalping trading strategies.
Pros Of Scalping Stocks
The benefits of scalping stocks include:
- Fast and regular profits – Scalping stocks provides investors with quick returns thanks to the short-term investment periods
- Reduced level of volatility – Trading in stocks is less volatile than in other instruments
- Can profit from flat markets – By targeting small stock price movements, traders can operate in slower markets and still make a profit
Cons Of Scalping Stocks
There are also some downsides of scalping stocks:
- Requires focus and commitment – Scalping stocks can be intense due to the speed at which trades are executed. You need to be glued to your screen for effective scalping as possible entry points can appear and disappear rapidly
- Emotional pull – To be a successful stock scalper you need to know when to quit. The premise of scalping is to sell when making a profit and having the discipline to do so can be hard
- Potential losses – Scalping stocks is riskier as it uses high leverage. If you stay in a losing position too long, it could result in larger overall losses. Make sure you have an appropriate risk management system in place
- Multiple trades mean higher commission – Apps typically charge commission for trading stocks, unlike other instruments like forex. Scalping stocks involves executing hundreds of trades in a short period of time, meaning greater commissions. Stock trading volume is also lower vs forex, resulting in higher spreads and lower liquidity
- Timing – scalping stocks occurs within local exchange trading hours whereas forex, for example, can be traded 24/5
How To Start Scalping Stocks
Scalping traders need access to advanced charting tools which allow them to rapidly execute trades. To start scalping stocks, you will need to choose a good scalping broker that can provide you with these features and options.
Many brokers do not offer scalping on their platforms as they do not have the appropriate software to handle the speed needed for scalping. eToro, Plus500, and Trading212 are some of many brokers that do not allow stock scalping. IG is a recommended stock scalping broker in the UK.
Below is a checklist to make sure you pick the right broker before you start scalping stocks:
Platform
Scalping stocks requires extremely fast trade execution. Scalping traders need access to advanced charting tools such as live feeds with real-time price updates and a quote system, for example. Brokers may license a platform such as MetaTrader 4 or offer proprietary platforms. It’s vital that whatever platform you choose supports ECN and STP trading. Without this, the software will not be quick enough for scalping.
Regulation
Selecting a regulated broker is always a wise choice. The UK’s regulator the Financial Conduct Authority will ensure that your funds are protected if your broker becomes insolvent.
Automated Trading
Some broker platforms may have algorithmic bots that can execute trades including downloadable robots like Expert Advisor (EA) on MetaTrader. Some other platforms give traders the ability to develop personalised robots using popular programming languages like Python, for example.
Demo Account
Some brokers offer a demo account. As with other types of trading, it is worth practicing stock scalping techniques in real-time in a demo account before parting with real capital. Finding what works for you and learning as you go could lead to delays and risk damaging profits. Scalping stock CFDs requires a specific mindset and discipline so it’s wise to practice before committing.
Narrow Spreads
The strategy of scalping stocks aims to profit off of changes in the security’s bid-ask spread. Therefore, scalpers will want tighter spreads so be sure to check the difference between trading desks. The wider the spread, the less likelihood of a profitable trade. Brokers that offer direct access trading which will automatically track bid-ask spreads are recommended too.
Level II Quote System
We recommend choosing a broker that has a Level II order book that provides more information than its first iteration (Level I), including placed order details, meaning stock scalpers can predict short-term shifts in the market when larger bids are placed by other investors.
Leverage
Scalping stocks requires greater leverage to increase a position to the point where it can return significant profits, multiple times a day. Of course, using leverage can also have the reverse effect, resulting in larger losses too so act with caution. Beware of leverage limits applied to stocks which tend to be much lower than for other instruments including forex.
Commission
When executing large volumes of trades when scalping stocks, broker commissions can build up significantly and ultimately take away from your total profit. Beware that brokers aren’t charging other fees too. It’s worth noting that while Robinhood offers commission-free trading, it is not useful to investors wanting to start scalping stocks.
Scalping Stock Tips
Here are some 101 tips and rules on scalping stocks to consider before getting started:
- Times – Scalping stocks can only occur within local stock exchange trading hours. The busiest trading times are best for scalping, specifically 13:00 to 17:00 GMT as London and New York Stock exchanges intersect
- Have a plan – The high-octane nature of scalping stocks can be intense due to execution speeds. Investors need to concentrate at all times and make sure they don’t hold a position for too long. Set a target profit amount per trade and stick to it
- Stop – As above, setting a trading stop that reflects your risk-reward ratio reduces your risk of large losses
- Stay connected – Make sure that your internet connection is reliable when scalping stocks i.e. don’t trust your mobile phone network. By its nature, scalping requires the trader to be fast-paced and you need a connection that allows to you enter and exit positions efficiently
- Liquidity – Scalping stocks is not suitable for penny stocks which have low volume. Good scalping stocks have high liquidity and volume, making them easier to buy and sell
- Research – Scalping stocks requires investors to have a clear strategy and plenty of research will help to develop this. As well as YouTube videos and forum discussions, there are various resources such as books, eBooks, online courses, and downloadable PDFs to become better informed on scalping stocks strategies. Following economic news will also help to spot trends and keep on top of external factors that could impact security volatility.
Final Word On Scalping Stocks
On the surface, scalping stocks looks like an easy trading strategy to make a profit, even in flat markets. However, it is not for the faint-hearted. While there are many useful online resources, the high-pressured environment and opportunity to offset small profits with a lack of discipline means novice traders need to be careful before jumping in.
FAQ
What Does Scalping In Stocks Mean?
Scalping trading is a strategy where investors can build profits by targeting small price changes that can be applied to stocks. The stock market generally has higher commission fees and scalping can make it harder to maintain a profit.
Is Scalping Stocks The Same As Day Trading?
No, scalping stocks is different from day trading in several ways. Timescales are much shorter when scalping stocks (seconds or minutes vs hours) and scalping requires higher volumes and leverage in order to make a profit in those shorter time periods.
Is Scalping Stocks Illegal?
Scalping stocks is legal and is used by both retail and institutional investors but it is not easy or a game. Only a few brokers actually offer stock scalping on their trading platforms.
Is Scalping Stocks Trading Profitable?
Yes, scalping stocks can be profitable if executed accurately. Winnings tend to be smaller but the win to lose ratio can be greater. Scalping is an extremely fast-paced trading environment so investors need to be precise and disciplined by setting appropriate risk-reward ratios. By holding a position for too long, stock traders run the risk of losing any profits they have earned.
How Do I Start Scalping Stocks?
To start scalping stocks, you need to choose a good scalping broker. However, many brokers do not offer scalping on their platforms as they do not have the appropriate software to handle the speed needed for scalping. There are various online resources for dummies to help you get started such as YouTube videos, forums, eBooks, courses, and PDFs.