Plastic Dreams magazine - Models Bruna Tenorio
Plastic Dreams magazine - Models Bruna Tenorio

In futures exchanges, a scalper is considered as a noninstitutional trader who makes a great number of purchases and sales each day. The scalper maintains the resulting positions for only brief intervals of time, and holds either zero or small net overnight positions.

He/she purchases and sells quickly, making either little profit or loss. In general, the scalper is ready to purchase at a lower price than the last transacted price and to sell at a fraction higher, therefore generating market liquidity.

Silber (1984) found that the average scalper holds positions open for approximately 2 min and trades an average of 2.9 contracts per trade. Working (1977) found that a typical scalper holds positions open from 1 to 9 min and trades only one to four contracts at a time.

Scalpers tend to specialize in market making. Collectively, they estimate the function of institutional market makers by making available the required liquidity services. They are seen as providers who match buyers and sellers requiring instantaneous execution of their trades.

In fact, scalpers receive income from hedgers by momentarily taking up hedging orders that are not immediately assimilated. The price of immediacy is, thus, the mechanism by which scalpers derive their profit. Nevertheless, scalpers are under no obligation to continually bid or offer, or to make an orderly market.

Scalpers tend to specialize in scalping particular commodities rather than moving around the floor, and they do little brokering. In fact, they do little speculating outside their home market and infrequently execute trades for other participants in the market.

To summarize, scalpers tend to trade for their own account in their home market in such a fashion as to generate income from the asynchronous order flow from customer accounts.