Scalping is by far the most employed forex trading strategies. This easy strategy is best suited for those who do not know much about the currency market or those who have joined the forex market as a trader. Forex traders who employ the scalping strategy are referred to as scalpers. Further, lowest spreads forex brokers are the best brokers to implement the scalping strategy. The aim of this article is to provide you with an overview as to why forex brokers that offer the lowest spreads are good for employing this strategy.
Forex scalping – What Is It
Scalping is a strategy, technique or method employed by forex traders to generate more profits. This involves a trader buying a currency pair, holding it for a short duration and selling it for a small profit. In the case of 90 percent of the trades, the time lapsed between opening and closing of the trade is never more than five minutes. Further, scalpers carry out hundreds of trades during the course of the trading session. While some trades generate profits, others result in losses.
However, the profit or loss associated with each trade will be very low ($0.01 or even less). At the end of the trading session, scalpers generally make a good amount of profit on aggregate basis because of positive contribution received from many of the individual petty trades. On average, total profits earned by a scalper ranges from $20 to as much as $300 or even more. However, the amount of profit that can be generated is not guaranteed. Sometimes, traders incur losses as well.
Top Forex Brokers of 2016
|Broker||Min Deposit||Spread||Leverage||Regulation||Open Account|
|$5||From 0.2 Pips||500:1||FSA (Saint Vincent and the Grenadines), CySEC||Visit Broker|
|$1||From 0 Pips||3000:1||CySEC, IFSC||Visit Broker|
|$5||From 0 Pips||888:1 “*This leverage does not apply to all the entities of XM group.”||ASIC, CySEC, IFSC Belize||Visit Broker|
|$1||From 0 Pips||2000:1||FCA UK, CySEC, FSP, BaFin, CRFIN||Visit Broker|
|$100||Starting 0 Pips||up to 400:1||FCA UK, NFA, CFTC, ASIC, IIROC, FSA, CIMA||Visit Broker|
|$300||floating, from 0 pips||500:1||FCA UK reference number 579202||Visit Broker|
|$200||Starting 0 Pips||500:1||ASIC Australia, FCA UK||Visit Broker|
|no minimum deposit||1.2 pips||50:1||CFTC, NFA, FCA, MAS, ASIC, IIROC||Visit Broker|
|$200||From 3 Pips||400:1||NFA, FCA, CySec||Visit Broker|
Why Forex Scalping ?
Traders employ scalping because it is a simple and safe technique. Further, losses are small and traders can easily absorb them. As scalpers trade very fast, their exposure to volatility in the market will be less. This means that sudden price changes and market trends will not trouble them. Further, forex scalpers are not faced with huge financial losses. This is because they employ techniques such as stop loss and take profit orders to keep themselves safe from the impact of sudden price changes. Actually, scalpers are not worried about market trends at all. They are more worried about the spread than anything else.
Who All Can Employ the Scalping Strategy?
Anyone can employ this strategy. There are no restrictions as to who can and who cannot. However, all traders who use the scalping strategy don’t become successful. Actually, this technique is best suited for small traders and those who have a limited amount of money to invest. Large companies and experienced traders do not use this technique because they will be looking for huge gains from forex trading.
In order to become successful scalpers, the trader needs to be patient, prepared to do hard work and invest some time.
Patience is the most important quality that scalpers need to develop. Traders who think that they can become rich in a few months’ time do not make good scalpers. Traders who are not happy with small profits also do not become good scalpers.
Preparedness to do hard work comes next. This is because scalping is simple, but not easy. It is a challenging task to execute hundreds of trades in a single day and for five days a week. It requires a lot of practice. It takes some time to get used to implementing the strategy effectively. Over time, traders will be able to handle it with ease.
Time is also an important factor. Traders need to invest up to five or six hours a day to learn scalping well. Automated scalpers may be good, but they are not as effective as humans on the job. This means that scalping must be done by traders themselves.
It is recommended that new traders start their career by learning scalping. This is because this forex trading strategy will prevent them from suffering huge financial losses even as they start off.
Forex Brokers with Lowest Spreads Vs. Profits
When it comes to choosing a forex broker for employing the scalping technique, traders need to consider a lot of factors. However, one of the key factors to be looked into is the spread offered by the broker. Forex brokers make money through the spread. Wider spreads always result in higher ask prices and lower bid prices. This means that traders pay more when they buy and receive less when they sell. Therefore, the chances of making profits are less.
Traders can make a great deal of profits by working with brokers that offer the lowest spreads, but they should focus on executing the trades properly. It is the quality of execution that determines whether traders make profit or not, even if they receive the lowest spreads from the brokers.
For example, the screen may show a tight spread, but trader’s order gets filled a few pips to his/her disadvantage. Sometimes, the order gets rejected mysteriously. This shows that though the broker is displaying lowest spreads, in effect the broker is delivering wider spreads. Delayed execution, slippage, trade rejection and stop hunting are techniques employed some brokers use to negate the effects of tight spreads offered by them.
Some other brokers offer fixed spreads. They also guarantee that the spreads will remain the same, irrespective of market liquidity. However, such spreads are generally higher compared to the average variable spreads. It is, therefore, clear beyond any doubt that the forex traders that the lowest spreads forex brokers are the best for scalping.
However, it is very important to choose the scalping forex broker judiciously. This is because it is difficult at times to ascertain all the different aspects just by reading reviews. Some aspects can be found out only when traders use real money on the broker’s platform. Traders can avoid such pitfalls by exploring more on their own and working with some of the scalping forex brokers that we have recommended on our website.