The Scalp

This term familiar to anyone who has bought prime tickets to a big game or a concert at the last moment by making a deal with a man who screams his "Got two here!" in the stadium parking lot. The man in the party previously bought tickets at the lowest possible price. He has no desire to attend the event. His goal is to negotiate a deal at a higher price of a desperate fan and pocket the difference as profit. It is a common practice, despite the local laws governing the seller, and sometimes the buyer can send to the pokey.

This is the essence of the "scalp." The same happens in the markets, more or less, and the scalper not have to worry about a cop slapping handcuffs on him. Traders scalp by during the session in the hope of making a series of small profits jump in and out of positions. They are not interested in owning some of the stock, futures contract or commodity. They are interested in timing and momentum. It is the typical "buy low, sell high" tactics.

Say, for example, ABC Company announces good news for the open. The best scalpers will get ABC when news hits and floor before trading starts. When the stock shows up in the first few minutes, will sell for a profit of a point or two. Scalper quickly

Later in the morning the momentum usually turns on the news-driven stock as other traders take their profits. That's when the scalper sells ABC short, watches it fall with perhaps a point and then cover the short for another winning trade. If the news is strong enough, ABC will begin to move higher again and the long scalper will go for another quick gain. This can stay all day.

If the momentum in ABC tails off, will find the scalper to another target of opportunity.

There is another similar term, "scalping", which refers to the practice of obtaining shares of stock for an Initial Public Offering or IPO, at a low price before they are released to the market. If the IPO is received by the market, the price will jump well. That's when this variety of scalper takes his money and runs.