Scalping

It involves taking quick and small profits, using the ask and bid differences. When there is bigger differences, as happens during increased volatility, such situations are used to chip off small profits. These trades typically lasts from a few seconds to a few minutes and minimizes the risk.

Other technical ideas like, over bought and over sold, support and resistance areas, trend line breakouts, breakout of different chart formations, range trading are all used to take trades at pivotal points, to profit from quick, small moves.

What it takes?
The trades are taken only in highly liquid stocks. Sophisticated trading systems and software, high speed internet, good multiple computers, real time tick data, a thorough knowledge of technical analysis, familiarity of chart patterns, habituated quick decision making, are all the prerequisites for this type of trading.

Similar quick profits are made in other forms of day trading like Arbitrage and Market Making.

Malpractice
Some major stock investment advisers, accumulate a share, in their own trading accounts, before recommending a stock for long term investing. After recommendation, when the demand increases, the shares are sold at a higher price, to make small but quick profit. The Supreme Court of the United States has ruled that such a scalping done by an investment adviser is considered as a fraud or deceit upon any client or prospective client and is a violation of the Investment Advisers Act of 1940. It is also ruled that scalping is also a violation of Rule 10b-5 under the Securities Exchange Act of 1934 if the scalper has a relationship of trust and confidence with the persons to whom the recommendation is made.

This differs from pumping and dumping which does not involve a relationship of trust and confidence between the fraudster and his victims.

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