Scalping is just shaving off pennies in stocks (20 cents in JPM, 10 cents BAC, etc.) or a point in the futures.
I scalped sometimes at a prop desk, so I'll just tell you how it worked. Admittedly, this strategy was not successful or a failure for me, but I saw the head trader make $3,000-$5,000 on a daily basis using this method.
We listened to the squawk (Trade the News) in the S&P 500 pit. We tried to gauge momentum of the futures and positioned bets whether the market would continue upward, downward or would reverse. I guess you can call us the scalpers of the index arbitrageurs. So listening to every tick on the S&P futures contracts, we scanned for stocks that traded with the market and eventually outperformed the mkt that day. These stocks were always the most most liquid (highest volume) issues and ideally the spread wasn't larger than 1 cent. One strategy I liked was buying a stock that was near its high, when the S&P 500 contracts were approaching yesterdays lows.
In regard to time, some of the trades lasted less than a minutes and some were held for 15 minutes or so. BTW, we generally didn't trade from 11:30am-1:30pm, 2:00pm. In response to your noise comment... considering that we trade the most liquid stocks (JPM, MS, BAC, C, etc.) it is difficult for a stock of JPM to go up 20, 30 cents on noise alone, especially during higher volume hours 9:30-10:30am and 3:00-4:00pm.
The biggest challenge with scalping is the commission fees (in addition to discipline). The high frequency of trades/volume makes the barrier costly so you must have a great commission structure in order to have a chance of surviving. You get good rates when you trade +100,000 shares on a daily basis (I'm not talking about IB accounts). I doubt many here on ET have that capability and have accounts that are over a $1,000,000.
Anyways, you buy/sell 1,000 to 5,000 shares of JPM at a time and you try to scale out of the position whether it goes in or against your favor...In a 5,000, you take of 500 shares for 10 cents, 500 shares for 13, 500 shares for 15, etc. We try to make baby profits with minimal risk. Our "edge" is that we may have a better feel for the S&P momentum because we can hear the emotion in the pit and the last tick comes out on the squawk a second faster than it does on the computer screen. But more of it has to do with the guy's voice that is announcing the numbers.
Hopefully that was a good explanation of the scalping I used to sometimes do. Although I was 50/50 with this strategy, I saw my boss make money 90% of the time doing this.... so I know it works. The advantage for him is that his commission was practically free because he is a partner at Lightspeed and that he has been doing this for over 15 years... He was the CEO of Broadway Trading in the 1990s lol.
