Scalping

Scalping is the fastest form of active trading, where traders aim to profit from tiny price movements — often just a few paise to a few rupees per share. Scalpers hold positions for seconds to minutes, executing a large number of trades throughout the day and relying on cumulative small gains to generate meaningful profits.

The strategy demands high-speed execution, tight spreads, and low transaction costs. Scalpers typically trade highly liquid stocks and index derivatives on NSE where the bid-ask spread is minimal. Nifty 50 and Bank Nifty futures and options are the most popular instruments for scalping in India because of their enormous liquidity, tight spreads, and rapid price movement.

Scalping requires a specific infrastructure: a fast and reliable broker with low latency order execution, real-time Level 2 market data (order book depth), and a stable internet connection. Many scalpers use dedicated trading terminals rather than web-based platforms. Commission costs are critical — even a few extra rupees per trade can erode scalping profits given the volume of trades.

Risk management in scalping is absolute. Scalpers use very tight Stop Loss orders, typically risking INR 0.5-2 per share, and aim for rewards of 1.5-3x the risk. Position sizes are larger than in swing or positional trading because the per-trade profit target is small. A disciplined scalper might risk 0.5% of capital per trade, ensuring no single loss is catastrophic.

In India, scalping faces specific considerations. Securities Transaction Tax (STT) and GST on brokerage add to costs. The move to T+1 settlement does not directly affect intraday scalpers since they close all positions within the session. SEBI's peak margin framework requires traders to maintain adequate margin throughout the day, which limits the effective leverage available for scalping. Most successful Indian scalpers operate on discount brokers like Zerodha, offering flat per-order commissions.