Forex trading has become excessively famous over the last few years. Traders from all across the globe seem to be more interested in Forex trading than any other investment opportunity. Although Forex trading has sound potential to bring traders healthy profits over a short period of time, still there is a risk that traders may end up losing all or major part of their investment in all of a sudden. This happens when the market changes abruptly. Due to this fact, traders use different Forex strategies, tips, and techniques, so they can prevent their account from incurring losses. At the same time, there is a group of traders who tend to be risk-averse. They prefer small quick profits and won’t mind waiting a little longer for their profits, to sum up into a big total.
Coming back to our topic of debate, we would like to mention that, Yes! Scalping is accepted by many Forex brokers all around the world. However, not all brokers support scalping. Usually, these are the ECN brokers who allow their clients to use scalping on their platform. ECN brokers are considered to be the favorite to use scalping techniques because of various factors such as instant trade execution, high trading volume helping scalpers to earn more by entering and exiting a large number of trades, and of course no slippage environment.
On the other hand, Market Maker brokers do not support scalping. The reason could be the operational structure of market makers since they make money through spreads – a commission-free Forex trading or by means of betting against a trader as whenever a trader loses, the broker wins. By allowing scalping, it may become very difficult for market makers to earn money since scalpers don’t leave their trades open for a long time. Ultimately, it is less likely that traders lose any trade, this makes market makers to suffer loses. So they (market makers) do not allow scalping.
Let us put some light on “Scalping” as well, so you can have a better understanding of what is scalping and how does it work?
What Is Meant By Scalping In Forex Trading?
It’s a famous trading method that traders use to earn smaller but quick profits. Using this technique traders open their positions with relatively short expiry timings that usually doesn’t exceed 5 minutes. This is how traders avoid the possible loss that could have arisen due to the market uncertainties if those positions were left open. Scalpers seem to be following the approach of a farmer who believes that it is better to have one bird in the hand than to wait for ten in the bush. Scalpers prefer short profits with their trades being closed earlier then to wait longer to have big profits. In other terms, scalpers don’t risk their trades to get affected by the uncertain behavior of the market in hope of big returns.
What To Look For When Choosing a Forex Broker If You Intend To Use Scalping?
Mentioned below are some important bits that you need to consider before you open an account with a Forex broker especially if you are a scalper.
The most important factor that traders are usually concerned about is the regulatory status of a Forex broker. If a broker is regulated that means your investment is safe. Obviously, no traders would ever wish to compromise the security of their funds. Regulation makes brokers follow certain rules and procedures and providing security to client’s investment is one of those rules. So you must not open an account with a broker that is unregulated.
Broker’s Policy Concerning Scalping
You need to make sure that the broker you are going to open an account with, allows scalping. This is very important if you intend to use scalping technique. Usually, you may find a broker mentioning clearly that it does or doesn’t support scalping. However, sometimes, the brokers tend to play smart and do not mention anything concerning scalping then, later on, they simply make you barred from doing scalping.
Broker’s Jurisdictional Limitations
Jurisdictional implications are also important while selecting a Forex broker for scalping. Sometimes, brokers don’t mind traders to use scalping techniques but they are not allowed to offer scalping by their respective regulatory bodies.
Type of Broker ECN or MM
As stated earlier, that ECN brokers are considered scalping friendly. So you must know what is the type of the broker you are about to sign up. If it’s a market maker broker then you may reconsider your choice. Remember, charging pattern of market maker brokers goes totally against scalping techniques. You cannot be allowed to use scalping if you open an account with market makers.
Rate of Trade Execution
Scalping requires speedy trade executions. You need to make sure that your prospected broker is good enough to offer you fast trading execution because exact prices can make the difference between a profit and a loss. You simply cannot afford delayed trade execution.