Best Scalping Forex Brokers Reviews - 2020
If scalping is your ‘chosen strategy’ to trade the markets then your first question should be, which broker best suits this style of trading and why? Although scalping is not allowed by all Forex brokers, there are still many Forex brokers that do allow scalping and that can offer excellent services for traders who believe that scalping strategies work.
With so many brokers to choose from, each offering its own unique set of tools, platforms and rules, it is helpful to highlight what you need to look for from your broker in order for you to decide how to make the right choice of broker.
Our aim here is to clarify the main issues to look out for when choosing the best Forex broker for scalping. We will also describe in more detail what scalping is, what is required to implement this type of trading, the best assets to scalp, and finally, how to best choose a broker that meets your needs and requirements as a scalper.
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Scalping with Tight Spreads
Because scalping involves the opening and closing of many, perhaps even hundreds, of trades daily, the first and most important issue to contend with is the tightness of the spread and commission structure on offer. The spread is the difference between the ‘buying’ and ‘selling’ prices of any given instrument at a particular time.
Simply put, the tighter the spread and commission (many Forex brokers charge only spread and no commission), the lower a cost of trading you pay per trade, and it therefore follows the more profit you make. Most brokers advertise how tight their spreads are, for example, half a pip on EUR/USD, and will often tighten their spreads in their demo accounts in the hope of winning your business as they compete with other brokers. Be careful to ensure that their spreads are also tight in their real, live money accounts.
In addition to a ‘tight spread’, another factor to remember is whether this spread is ‘fixed’ or ‘variable’. A fixed spread is a spread that never widens or narrows, regardless of market conditions. A variable spread is one that can fluctuate according to market conditions, as is natural: when there is more liquidity (participants buying and selling), spreads tend to narrow; when there is less liquidity, spreads widen. The point here is to always try and choose a broker that offers tight spreads, but to also make sure to find out if these spreads widen at certain times and by how much.
Scalpers Need Fast Trade Execution
Now that you have found a scalping broker with low spreads, remember that scalping requires ‘speed’. While technology has recently provided a general boost in terms of the overall speed at which retail brokers can execute trades, the fact remains that there will always be certain brokers that can execute at a faster or slower rate than average. This is due to many factors, some of which include technology, software, infrastructure colocation and so on. In any case, a main objective for a scalper is to choose a broker with fast execution times, as speed will invariably be a determining factor in your trading performance when you are trading in a scalping style.
If you plan to use scalping as a strategy, you will be best served by a Forex broker that provides a fast, reliable and intuitive platform that will enable you to view prices and execute orders with both ease and speed. For example, you should always choose a platform that offers ‘one click trading’ because often in scalping the best opportunities are gained and lost in a fraction of a second, and two clicks can mean the difference between success and failure.
How Forex Brokers Define Scalping
How a broker defines scalping is also very important, because what will or will not be allowed at different brokers allowing “scalping” will often be a little different. Each broker will set its own guidelines and rules and will implement them accordingly. The general definition of scalping is a strategy that involves placing a large number of trades and holding them open only for short periods of time before closing them, in an attempt to profit from small price movements. This process may be repeated by a scalping trader dozens or even hundreds of times throughout a single trading day.
It is therefore your job to identify exactly how the broker you have chosen defines ‘scalping’ and whether this will affect your own individual scalping strategy. For example, pay attention to the finer details in the small print such as the amount of trades you can place daily, and whether there is a time limit to how long you may stay in these trades before you will be required to close them.
It is very common for brokers to differ on these definitions of what exactly scalping is, so it is well worth your while ironing out the fine details before you begin to try to trade with them in a scalping style. The last thing you want is to have the hassle of having your trading account closed and deposit refunded due to a breach of rules you were not aware of.
Which Forex Pairs are Best for Scalpers?
Not all Forex pairs are suitable for scalping. As mentioned before, in order to implement an effective scalping strategy, trade those Forex pairs that have high liquidity, ensuring not only tight spreads but also effective and fast execution.
Scalping opportunities often occur during fast-moving markets, therefore it is vital that the pairs you are trading tend to not incur slippage with your preferred Forex broker. Slippage is when you get filled at a price less favorable than the price at which you put your order, or the market price you were seeing when you hit the button to execute a market order. The more liquidity, the less chance of slippage.
The best Forex pairs for scalpers are the most popular and liquid ones: the majors such as EUR/USD, GBP/USD, and USD/JPY. Each of these currency pairs has its own nature and volatility “personality”.
As volatility levels increase, the large number of traders monitoring the most liquid pairs usually means there will be a rush of traders fighting for each opportunity, therefore increasing your chances of scalping profitably.
Scalping and Leverage
Leverage affects scalping in the same way it affects all other trading strategies, it is there to enable you to place larger trade sizes than the capital you hold in your account, if you want. For scalpers though, leverage is especially significant.
As mentioned earlier, the role of the scalper is to profit from lots of small moves many times throughout the day. This often means that the trader ahead of time knows the entry price, the exit price, the stop loss level and the target level.
Essentially, the scalper’s risk in terms of pips can be quantified ahead of time, so a scalper is usually geared up to maximize the use of leverage in order to maximize profits.
While of course most ECN brokers (electronic communications networks that give traders direct access to other participants in Forex markets) will offer you higher leverage, different brokers will offer different levels of leverage.
For example, some Forex brokers may offer a maximum leverage of only 30:1 whilst others may offer as much as 1000:1, presenting you with an opportunity to place bigger trades.
We have shown how tight spreads, speed and reliability of execution, the precise definition of scalping, choice of Forex pairs to trade, and the use of leverage and its maximum will have a big impact in determining your performance as a scalper.
While all of the above issues are very important, it is difficult to say which one you should focus on most. When choosing which Forex broker is best for scalping you really want to choose a broker that scores highly in all these areas issues to match your requirements.
Which factors you make a priority will depend on your own individual scalping style. Don’t forget you need to be sure that your deposit is safe with any broker. If a broker isn’t reliable and well regulated, all the other factors can become irrelevant.
It is a good idea to open a demo account with your broker of choice. This will not only provide you with an insight into what they offer, it will also give you a feel for their trading platform and spreads and commission structure – but remember, a live “real money” account does not always precisely mirror the performance of a demo account.