Scalping is a trading strategy, which involves the opening and closing of positions within minutes or even seconds to seize small profits per trade. Scalping requires a high degree of concentration and quick decision-making, as well as access to advanced trading tools and platforms to capitalise on these rapid price changes.

Identifying, monitoring and detering scalpers can be quite challenging for brokers due to the rapid and high-frequency nature of their trading activities and the advanced tools they use. 

It is therefore essential for brokers to employ sophisticated analytics and surveillance systems to effectively manage the associated risks.

Understanding the Demands of Scalpers

Scalpers use high-frequency trading strategies to gain small, consistent profits from minor price changes. They depend on brokers that offer:

1. Low-latency order execution platforms to take advantage of fleeting pricing inefficiencies.
2. High bandwidth networks and servers to handle high volumes of orders.
3. Advanced risk analysis dashboards and account monitoring tools.

Risks Posed By Scalping Activities

Unchecked scalping activities can cause monetary losses and present multiple risks to brokers. In addition to financial risks, there are significant system-related risks. These are primarily caused by the high-frequency trading strategies used by scalpers, which demand quick opening and closing of positions, often within minutes or even seconds.

The need for a sophisticated Risk Management tool

Brokers need sophisticated defences against scalping to avoid significant aggregate losses from scalpers who make numerous small profitable trades throughout the day.

Tapaas offers several mechanisms to identify, monitor, and even automatically curb such threats, such as real-time dashboards, alerts and scalping identification and labelling

Dashboards

Tapaas’s advanced risk analysis dashboards allow real-time:

• Screening for accounts with high daily volume, low holding times.
• Reviewing of the percentage of successful versus unsuccessful trades.
• Checking for extended consecutive profitable trade streaks.

Alerts

Tapaas provides a comprehensive suite of alerts that utilise advanced scalper detection algorithms. These alerts identify clients who are probing for pricing vulnerabilities using microlot trades, or clients engaging in multiple short-term profitable trades, among other activities.

Labels

One of Tapaas’s most frequently used features is Client Profiling, or labelling. Tapaas identifies scalpers by monitoring the trading behaviour they exhibit. It then assigns labels to traders identified as scalpers. 

The brokers are then able to further investigate and mitigate their risks taking informed decisions and actions through Tapaas or other terminals. 

If you would like to know more about how Tapaas can help you identify and manage scalpers or other bad actors, contact us today.