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Fancy making a profit in a matter of seconds? Scalping could be for you. It’s a tough environment though and there are quite a few factors to consider, particularly as it is a high risk-return strategy. This review considers the pros and cons of scalping and which brokers facilitate it. The following topics will be covered:
Scalping uses the basic principles of trading but takes them to an extreme level. As with other strategies, the aim is to optimise trade entry and exit points to make a profit.
Scalpers take things to an extreme level and execute a lot of short-term trades, sometimes for only seconds or even a fraction of one second. They typically use high leverage — the aim being to turn a lot of small profits into one big one.
Scalping isn’t for everyone. If you are considering trying it, then it’s strongly recommended you use a demo account first. Clicking on the links to these brokers will take you to their free demo accounts where you can experiment using virtual funds but real-time prices.
If you have tried scalping in a demo account and are looking to take it further, then trying it out at all the above brokers, is recommended. You’ll soon notice small differences stack up in terms of whether you make a profit or not. Scalping is all about detail, in terms of both trading behaviour and broker selection.
One clear demonstration of how scalping is a little bit left-field is that not all brokers allow it. This doesn’t tend to be because of concerns about breaking any laws. It’s more that the strategy requires a degree of trading infrastructure, which not all brokers have.
There are more than enough brokers that have the technical expertise to support scalping, to ensure you can draw up a healthy shortlist of candidates for your business. As scalping has some unique quirks, some of the features you might want to consider are listed below.
Scalpers spend a lot of their time watching price monitors. As a result, you need to be happy with the graphics of your selected broker, and these can vary considerably from broker to broker.
You’ll find that a lot of the features that make a good broker operate behind the scenes. Some of these features will become part of your daily routine. One that we particularly like is the tool provided by XTB that takes written data releases, news announcements and converts them to audio. That way, you can multi-task by keeping your focus on price charts and listening out for updates.
A long-established and well-regarded broker. XTB has, over the 15 years of its operation, built up a strong reputation among the scalping community. It is now one of the largest stock exchange-listed FX & CFD brokers in the world and has bricks and mortar offices in over 13 countries including the UK, Poland, Germany, France and Chile.
The xStation 5 proprietary platform and MetaTrader MT4 service are both available at XTB. Having a choice between two best-in-class dashboards is a stand out feature for XTB, and trialling its service in a demo account is well worth the time invested.
Pepperstone is exceptionally client-focused. Its customer service team regularly scoops up industry awards and the broker appears committed to supporting its clients.
Trusted by 89,000+ clients worldwide, it is a platform designed to help scalpers. Although it doesn’t have an extensive range of equity markets on offer, it has enough to suit most traders. The Alarm Manager function is just the kind of tool that helps scalping traders.
Client protection — Pepperstone Limited is a limited company registered in England & Wales under Company Number 08965105. It is regulated and authorised by the Financial Conduct Authority (Registration Number 684312). Registered office: 70 Gracechurch Street, London EC3V 0HR, United Kingdom. (Source: Pepperstone)
Tickmill is all about low costs and fast, reliable trade execution. The broker is a top-pick for many who are considering scalping and has also in recent years built up its range of additional services. The research and analysis sections are particularly popular due to being very trade-orientated.
FP Markets leads the way in terms of the number of stock markets on offer. This scalping-orientated operation bucks the trend to some extent by offering markets in over 10,000 stocks and 19 major indices.
FP Markets was rated by Investment Trends as the Best for Quality of Trade Execution 2019.
Source: FP Markets
As with most strategies, getting a basic understanding can be easier than making a profit out of them. There are, though, some practical tips, which might help.
Whether scalping is for you or not is a question that can only be answered by trying a demo account. If you shift to live trading, then start off in small size.
Scalping is a high-octane experience and while that can be exhilarating, making money requires keeping a cool head. It also requires using a broker that is properly set up for the strategy and the four mentioned are good places to start.
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