What is scalping stocks or ETFs? Best online brokerage trading firms for scalping in 2012?



Stock market is full of special terms that are confusing to the outsiders. One of them is Scalping. So what is Scalping? In simple terms, it is a trading strategy of buying an investment and then very quickly selling it for a small profit. Sometimes the trader sells security he just bought within seconds after buying it.

Obviously, the person doing Scalping is not an investor. He does not care about fundamentals of the company or ETF he is scalping, or what they do, or what prospects they might have. The goal is simple: to find the most probable way to make quick profit and execute it. The people doing stock/ETF scalping are called day-traders: as the name suggests, they are in and out of their positions within a day. Day traders usually don't hold securities overnight. They could buy security in the beginning of the day and then sell it at the market close. Or they could trade in and out many times during the day.

Since very often the sale after buying comes so fast, the price could only move so much. Sometimes it's a few cents. Sometimes it's just 1 cent. How could one make money on 1 cent move? The answer is easy - volume. If you buy and then sell 20,000 shares for 1 cent difference, you made $200 in profit.

Obviously, with scalping the biggest expense the trader incurs is trade commissions. It could eat up trading profits really fast. Especially considering that not every trade is profitable: not only you loose money on the trade, but you also pay commissions.

For this reason it's extremely important for traders to find the best brokers for scalping - least expensive and reliable. Traders actually need two brokerage firms: one that offers very low flat-rate commissions and one that offers low per-share rates. For larger orders, of 800 shares or more it's advantageous to use flat-rate firm. For orders of up to 800 shares, the firm with per-share plan should be used.

For flat-rate plan the best broker for scalping is OptionsHouse: they charge only $3.95 for stock or ETF trades - read full Optionshouse Review. For per-share plan the best brokerage firm for scalping is LightSpeed Trading, charging just $0.045 per share with $1 minimum per trade - read full LightSpeed Trading Review.

Scalping is definitely not for everyone. But if executed properly, with discipline and without emotions, it could be very profitable.

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