Scalping

Scalping is a high-frequency trading strategy where traders aim to profit from small price changes in an asset over very short time frames. In the context of cryptocurrency and derivatives, scalpers execute a high volume of trades throughout the day, attempting to capture minor spreads.

This strategy requires low latency, efficient execution, and a deep understanding of market microstructure. Because scalping involves frequent transactions, it generates a significant number of taxable events, making tax reporting complex.

The short-term nature of these trades means that most gains are taxed at the higher ordinary income tax rates. Successful scalpers rely on advanced algorithmic tools and high-performance infrastructure to gain an edge.

It is a demanding style of trading that prioritizes speed and precision over long-term price appreciation.