The prices of financial securities are constantly changing. Each order that is placed creates a new dynamic which can create a different emotional response from investors who participate in trading a specific security. These movements may be captured by investors using a technique known as scalping.
The idea behind using a scalping trading strategy is to capture small movements as the price that people are willing to pay for a security changes relative to the price they are willing to sell a security. When a security is volatile and moves rapidly, the opportunity to scalp that security increases. The amount risked is small and the reward is small, and the strategy entails taking small amounts out of the market dozens of times a day every day.
Volatile securities allow traders to take advantage of changes to the bid-ask price. During normal trading conditions the movement of the bid-offer spread is steady as standard flow from transactions creates a trading environment where supply and demand stay in balance. When market conditions become volatile, the bid-offer spread increases as a result of a supply and demand imbalance. This could be from a new market announcement or changes to liquidity.
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