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Key Takeaways
- Scalpers target small moves and short holding periods, so execution quality and repeated costs are central to the strategy.
- Evaluate win rate together with average net gains, average net losses and execution costs.
- Choose the order from the quoted spread, available size and required execution timing.
- Define the price exit, maximum holding time and position size before entering.
- Review each round trip from actual average fills and costs to measure the strategy’s net result.
What is scalping?
Scalping is a short-horizon trading style that seeks small price moves through frequent entries and exits, holding positions for seconds or minutes. Because each target is small, execution quality and repeated costs are central to the result, so the setup, entry, quantity, price exit and maximum holding time are defined before the order is submitted.
Stock, futures and options scalps use different contract economics. Convert each price move into dollars with the instrument’s actual units and multiplier.
Formula
Net long scalp result = (average exit fill − average entry fill) × executed quantity − commissions and fees- For a short scalp, reverse the price subtraction: average entry sale minus average exit purchase.
- Average fills already include spread and slippage; subtract them separately only when you measure the gross result from the decision price.
How to calculate a scalp trade’s result
A trader buys 500 shares at an average fill of $25.02 and sells at $25.08, paying $3 in total regulatory and platform fees.
- $25.08 − $25.02 = $0.06 gross gain per share
- $0.06 × 500 = $30 gross gain
- $30 − $3 = $27 net gain before taxes
- One $0.20 adverse move on 500 shares = $100 gross loss
The completed trade earns $27 after $3 in fees. A stop at $24.82 would have lost $100 on price and $103 with the same $3 fee, so one loser costs more than three winners earn.
The average fills already include the spread and slippage you paid, so count them once. Break them out separately only when you measure against the price at the moment you decided to trade.
Scalping win rate and the break-even payoff
At a $24.82 alternative exit, the same 500 shares lose $100 on price. With the same $3 fee, the net loss is $103.
With only $27 winners and $103 losers, the break-even win rate is 79.2%. Run the same math on your recorded wins, losses and costs to find your own line.
Order types and liquidity for scalping
Compare bid and ask, displayed size and recent execution with the proposed quantity. Track partial fills and remaining orders. A resting limit follows venue priority; a marketable order accesses available interest.
Define the response to an unfilled entry, a partial exit and the time limit. Keep position size consistent with buying power, portfolio limits and the planned exit scenarios.
Record the trigger, fills, holding time and net result of each trade, then review them by setup and session window to refine the execution process.
Risks and limitations of scalping
- Net every scalp after costs. Costs repeat on every round trip and take a large share of small gains: in the example, the $3 fee absorbs a tenth of the $30 gross profit.
- Size the stop against the average win. One loss can erase several wins: the example’s $103 loser costs more than three $27 winners earn, so that two-outcome model needs a 79.2% win rate to break even.
- Measure every result from actual fills. Partial fills, unfilled entries and slippage change the outcome, and a marketable order executes at available prices rather than a guaranteed price.
- Test each instrument’s spread and depth at the intended size. They set the room for profit, so a setup that works in one instrument can fail in a wider or thinner market.
- Check the account rules before you scale up. Frequent intraday trading runs under the broker’s margin or settled-cash rules and its house requirements, so a strategy that fits one account can breach another’s.
Bottom line
Scalping seeks many small price moves, so execution and costs matter as much as the setup. Define the exit and time limit before entry, measure every round trip from actual fills after fees, and compare the win rate with the size of the average win and loss.
Clear answers
Frequently Asked Questions
Sources and Further Reading
How entries are sourced, calculated and updated: editorial methodology.