To make it to the list of top scalping forex brokers, firms need to comply with the regulations and criteria which are discussed in detail below. You will read about different factors while choosing from the best online Forex brokers, their types, spreads, scalping forex pairs and top scalping strategies in this article.
A comparison of different trading techniques is also done for a better understanding of the user. Besides FAQ, this guide also provides a detailed answer to different questions you might have regarding scalping forex brokers.
What are Scalping Forex Brokers?
A scalping Forex broker is a broker that allows Forex scalping as a trading strategy. A broker is an individual or firm that acts as a middleman between an investor and a security exchange. Individual traders and investors need the services of a broker to trade in an exchange. Forex scalping is a technique which involves buying and selling a currency pair multiple times while holding it for a short period of time. In scalping trading, a trader holds an asset just for a few minutes. In most cases, a scalper holds an asset just for two minutes while in other trading techniques, the holding time could be in hours, days or even months.
How do Scalping Forex Brokers Operate?
Forex brokers that allow scalping ought to be no dealing desk (NDD) brokers. They link the two trading parties together and their order goes straight to the interbank without having to pass through the dealing desk. Straight-through processing (STP) and Electronic Communication Network (ECN) forex brokers are two categories of NDD brokers.
STP brokers only link two trading parties, take their price quotes from liquidity providers and charge a commission from the spread. They usually have more than one liquidity provider which means they select the best price from the market and then add a small markup of usually 1 pip to get profit. They offer fixed as well as variable spreads. The best ECN brokers also link two trading parties and they directly connect buy and sell orders through an electronic communication network. They charge flat rate commissions on the spread. There is no markup on the spread. They provide an electronic communication network which results in high-speed transactions. ECN instantly matches orders by traders with the best available buy and sell prices, hence the outcome is tighter bid-ask spreads. In short, these brokers offer high-speed transactions and tighter spreads for scalping.
Factors to Consider when Choosing a Forex Broker that Allows Scalping
You need to consider many factors before trading. The following are some key factors that need to be contemplated before choosing a scalping broker to optimise positive trading.
It is very important to look for a licensed and regulated broker that allows you to scalp. Registering with a regulatory body adds credibility to a broker. The best scalping brokers will always be authorised and regulated by regulatory bodies. They must abide by the given rules of the regulatory body.
If these firms are operating in multiple jurisdictions, look for the corresponding regulation. Examples of this are the Australian Securities and Investment Commission (ASIC) in Australia, the Financial Conduct Authority (FCA) in the United Kingdom, the Financial Sector Conduct Authority (FSCA) in South Africa, the Monetary Authority of Singapore (MSA) in Singapore, and many more.
Forex Brokers that allow scalping are linked with different platforms and have different required account minimums and transaction fees. Always choose those brokers that provide direct access to the market for higher speed (no dealing desk brokers, STP brokers or ECN brokers). ECN brokers are well-known for automated trading systems. In scalping, fast execution is crucial for trading. These brokers allow automatic trading that enables faster execution. In scalping, delays in trading even for some milliseconds can change profit into a loss. To make it to the list of top Scalping Forex brokers, it is crucial to offer ECN execution. These brokerage firms provide a desktop platform as well as a mobile app for easy working.
The best Scalping Forex broker provides faster execution to allow efficient trading. It’s especially important for traders who do scalping trading that process many transactions in a short time, to have a platform with higher execution speed. ‘Execution’ refers to when the trades that you placed are fulfilled by your broker. Hence, the brokers should provide no dealing desk fast execution to traders for making fast and efficient trades.
These platforms should provide optimal brokerage conditions to their clients. A broker should offer different types of trading instruments, which include forex pairs, commodities, cryptocurrencies, indices and stocks. Before choosing a Scalping Forex broker, it is advisable to look at the trading instruments, advanced platform options and their prices among the brokers.
It is worth it to do some research on the broker’s reputation on various platforms. Things like discussions on trading forums, news releases, reviews, awards, and publicly listed financial information can quickly help to build a profile about whether the chosen forex broker can be trusted or not.
The difference between the bid (buy) and the ask (sell) price is called the spread. Generally, lower spreads are for the benefit of the trader. Scalping depends on slim spreads because you’ll be entering and exiting markets recurrently throughout the day. Traders need to consider low spreads brokers when scalping. Consequently, you need to focus your efforts on assets offering the greatest trading volumes. The presence of competitive spreads is one of the main factors to consider when choosing a scalping Forex broker. For example, Capital.com and the eToro broker platform, with less than 0.6 pips spread, offer low spreads for scalping.
The maximum amount of leverage available is set by the local regulator in certain jurisdictions and it applies to every broker. Whereas, in some jurisdictions, there is no leverage restriction and the amount of leverage is flexible for the client.
Fees and Commissions
The commission is another charge to consider. To benefit from a scalping strategy, it’s important to choose a scalping forex broker for small spreads and zero commission. Many firms offer different account types and have different fee structures. Some account types have high spreads with zero commissions while other accounts offer zero spreads with high commissions. The best scalping forex brokers offer competitive spreads with low commissions to facilitate scalpers.
As with any service, things can go wrong or technical issues can happen like a platform outage, a pricing error, an incorrect account statement etc. No broker can avoid that, but as a trader, it’s vital to know that the broker is easy to reach and that they are accountable and act quickly to resolve issues fairly. It’s also important to see that the platform offers support in your language.
Pros and Cons of Scalping Forex Brokers
Top scalping brokers do have more advantages than disadvantages. Here are some pros and cons of scalping forex brokers:
- Cheaper Rate
- Faster Execution Time
- Allows Trading from Anywhere in the World
- Desktop Platforms and Mobile Apps are Available
- Transparent Fee Structures
- Free Educational Content and Events
- A Wide Array of Trading Instruments
- Dependent on Fast Internet Speed
- Software Malfunctions may cause Trading Errors
- Novice and Unknowledgeable Traders are Allowed
- Addictive in Nature
Best Forex Pairs for Scalping
A forex pair/currency pair is a quotation of two different currencies, where the value of one currency is quoted against the other. The first currency enlisted in a forex pair is called the base currency and the second one is called quote currency. e.g in EUR/USD EUR is the base currency and USD is the quote currency. Forex pairs can be major, minor and exotic. The following are some major forex pairs to choose from for scalping.
EUR/USD is a major forex pair that represents the two most powerful economies in the world. It accounts for 20% of all forex trading transactions on a daily basis, making it one of the most liquid forex pairs. The high liquidity of this pair makes it ideal for scalping due to the enormous volume of trading activity it offers. It is important to choose the best broker for trading EUR/USD as it is heavily traded, and the spread is usually very tight, providing ideal scalping conditions and increasing the likelihood of getting the desired price.
British pound sterling and the United States dollar is a major forex pairs. It is commonly traded in high volumes. Frequent fluctuation in price, exchange rate, and pips movements make it a volatile pair. This can result in large profits as well as large losses particularly when the volatility is high. Strong knowledge of technical analysis is required to scalp this major pair.
The US Dollar and Japanese Yen AKA “the Gopher” is another commonly traded major pair. It is also a stable forex pair which is traded in high volumes and offers a tighter spread, making it a good pair for scalping. It always has statistics posted online and is very popular in the world due to the prominence of both currencies.
Aka ‘the loonies” is a combination of the powerful US dollar and Canadian dollar. It contains the authoritative USD and CAD as commodity currencies. This major pair has unique properties. The economies of this pair run parallel being neighbouring countries, which eliminates uncertainties from overseeing distant economies. Economic news is updated on the same day and both currencies also run under the same trading session.
This currency pair constitutes the US dollar and the Swiss franc. This forex pair is particularly favoured by traders when the economic and political situation of the region is not stable. The pair negatively correlates with the EUR/USD and GBP/USD.
Top Scalping Strategies
Top scalping strategies involve utilising price movement, understanding where potential buyers and sellers are and also implementing risk management. The following are some top strategies used for scalping forex pairs.
1-Minute Scalping Trading Strategy
A 1-minute scalping strategy is the most common scalping strategy traders use to scalp forex pairs. This strategy involves starting a trade, gaining a few pips and then closing the position. As you only make a few pips per trade, so trading in high volumes is crucial, that’s why traders often place 100 trades per day. A 1-minute scalping strategy is relatively simple to master and good for beginners and can be very fruitful if implemented correctly.
You would probably get a profit of around 5 pips per trade with a 1-minute scalping strategy because profit or loss per trade depends upon the time frame you are using for scalping.
RSI Scalping Forex Trading Strategy
The relative strength index is a popular overbought and oversold indicator. This indicator is good for taking small profits from the market. The index is adjusted daily by the amount the market is moving high or down. The RSI values are from 0 to 100. When the market has been increasing rapidly RSI will have a high value. When the market has been selling off sharply RSI will have a low value.
RSI scalping involves scalping with RSI within a short timeframe. It generates a lot more signals for buying and selling when a short period of time is taken. Most traders use the standard, which is RSI set on a 14 period. Popular RSI periods are 5, 7 and 50. Forex scalpers use the increase in the number of signals to better make out the immediate trend of the chart and enter & exit the trade based on their findings. In short time frames, the Relative Strength Index is very sensitive, often reaching extreme highs and lows, and generating contradicting signals. For scalping, it is advisable to use it with a combination of other indicators. For successful RSI forex scalping, other indicators should also be used to determine the main trend.
Bid and Ask Market Making
In this strategy, a scalper aims to capitalise on the bid-ask spread by simultaneously posting a bid and making an offer for a specific asset. The difference between the bid price and the ask price for a given asset is called spread. This strategy can be fruitful only on comparatively immobile stocks where big volumes are traded without any real price changes.
This kind of scalping is most challenging to do because a trader must compete with market makers for the shares on both bids and offers. Market makers are those entities that profit from the difference in bid and ask spread and are usually brokers or member firms of the stock exchange. In the bid and ask market making, the profit is so small that any stock movement against the trader’s position will result in a greater loss than their original profit target.
ECN vs Non-ECN vs Fixed Spreads
ECN Forex Brokers
An ECN broker is a type of foreign exchange brokerage that directly connects buy and sell orders through an electronic communication network (ECN). ECN also issues current buy and sell price quotes that entail the highest bid price and lowest ask price offered by participants for each forex pair. It instantly matches orders by traders with the best available buy and sell prices and the outcome is slimmer bid-ask spreads. Traders can enter or leave the trading positions at more reasonable prices than non-ECN brokers. This type of broker does not create a problem of requotes for traders. ECN brokers do charge a flat commission rate on each trade.
Non ECN Forex Brokers
NON-ECN forex brokers are dealing desk brokers. They don’t execute orders via electronic communication network, rather they execute orders in a synthetically created market. They are the worst brokers as their profits increase when you lose. As they take the opposite side of a trader’s trade, they deliberately create an environment which causes traders to lose. A Non-ECN broker can choose to accept or decline the client’s order so the trader often loses a good opportunity for profit. These brokers determine the spread through the dealing desk. Also called market makers, they often present the traders with problems of requoting which happen due to their slower execution. There is no price transparency.
Fixed Spread Brokers
Fixed spread brokers are those brokers whose spread remains fixed no matter what happens with the wider market. They offer quick execution and no commission. Fixed spreads favour those trading strategies which depend on squeezing out every pip of the market. They are suitable for beginners as it is easier to calculate the cost than variable spreads. Day traders often favour them as the spread is fixed which helps in lowering the cost. They provide price transparency.
Scalping vs Swing Trading
Swing trading involves taking trades that last a couple of days up to several months. Whereas in scalping, hundreds of trades per day are made in which positions are held for a very short time, sometimes just seconds. In scalping profit targets are multiple but small whereas in swing trading profit targets are few but large. Additionally, in scalping, constant monitoring and vigilance are required all day whereas in swing trading there is more comfort in trading as traders don’t need to sit all day reading the charts. A trader with impatience, vigilance and discipline can be a good scalper whereas patience and precision are required in swing trading. Swing traders can gain equal profits as scalpers by doing less risky and time-consuming trading. Meanwhile, scalpers are protected from significant losses linked to a single trade.
How much Money do I need to Start Scalping?
To start scalping, many forex brokerage platforms offer a minimum deposit of less than $100. For instance, eToro, a leading scalping forex broker, offers its US clients to make a minimum deposit of $10, while clients with other nationalities must meet a minimum deposit of $50 for opening an account. After that, you are free to deposit as much as you like or as little as you desire to start scalping. All the payments made in US dollars are fee free whereas other currencies need to pay a currency conversion charge of 0.5%.
What are the Regulations Concerning Scalping?
All scalping forex brokers should be regulated by a regulatory authority. Every broker must meet some requirements to obtain a licence, which is in the best interest of the clients. Some firms working in certain jurisdictions may allow free-hand scalping while some may put some limitations on scalping. For example, forex brokers working in US jurisdiction do not allow scalping with hedging. In other cases, despite being allowed by the regulatory authority, some companies might not allow scalping as it puts so much pressure on the broker.
Regulatory bodies in some countries, in the UAE for example, force forex brokers to entitle a segregated account to a client. This means the broker cannot access your money and this provides a guarantee that you are the sole owner of your finances. Another requirement for brokers is that they are expected to submit their financial books for review regularly so that the concerned authorities can identify any risks of collapse and inform clients on time. In this way, scalpers enjoy a lot of freedom and control with their strategies.
Some regulatory authorities also implement different mechanisms to prevent fraud, corruption, identity theft and money laundering. For instance, MONEYVAL is a monitoring mechanism of the Council of Europe and is in charge of the task of enforcing principal international standards to counter money laundering. It is entrusted to make recommendations to national authorities for making necessary improvements in the brokerage systems.
Why Scalping Forex Brokers Need to be Regulated?
Regulations play a vital role in protecting a trader’s funds. Being regulated by a regulatory body guarantees that the forex broker you trust your money with is authentic and reliable with no ill intentions. A regulated Scalping Forex broker gives traders affirmation that there are certain standards in place and that in case something goes wrong and the broker can’t resolve the issue, there is the possibility of going to a concerned authority to solve the issue fairly. An unregulated broker could be a scammer as it has no one monitoring his business. Thus, the company has no rules or guidelines to follow. The following are some regulatory bodies working in various jurisdictions.
Financial Services Agency (FSA)
The Financial Services Agency functions as a government agency and financial regulator. It was set up in 2000 and oversees banking, securities, and exchange among many other sectors in Japan to ensure that the financial system of Japan runs seamlessly.
Almost Every individual and company offering, selling, trading, or even simply promoting financial services or products in the UK have to be authorised and regulated by the FCA. Set up in 2013, FCA regulates over 50,000 businesses. Trading platforms looking to offer their services in the UK must meet the requirements of FCA before they can be granted authorisation.
If a broker under their jurisdiction gets bankrupt and shuts down, the FCA provides compensation to all the investors involved. That’s why most FCA-regulated brokers easily win the confidence of traders. Therefore, it is important to make sure that the scalping forex broker you choose in the UK is regulated by the FCA.
Are Scalping Forex Brokers Safe?
Yes, most Scalping forex brokers are safe provided they are regulated and have insurance and other schemes in place to protect the client’s funds. When deciding which is the best scalping forex broker, you must make sure that the insurance policies of the broker are adequate to compensate customers in the case of bankruptcy and that they also have other policies in place. For example, Capital.com has a negative balance protection scheme for all clients which promises to zero out the balance in client accounts once it is proven that they have started to lose more money than they had initially deposited.
Many Forex brokers like GSL Markets set policies like (Anti-money laundering/certified financial planner) AML/CFP policy and KYC (know your client) policies. These policies are rigorously put in place to prevent identity theft, money laundering, financial fraud and terrorist activity. GSL Markets set a variety of security measures and fraud controls for protecting the security of any sensitive data it might get, such as account details and financial transactions made.
All scalping forex brokers are supposed to run secure websites and platforms, with proper security checks and measures, which eliminates the threat of hackers stealing customers’ private data. Top scalping forex brokers store the funds of their clients in top banks to minimise the risk of losing them. Money can be withdrawn whenever the client wishes to as long as the withdrawal amount is greater than the minimum set and all other minimum deposit requirements set by the broker are met by the client.
What Reddit & Quora Say About Using Forex Brokers for Scalping
A Reddit user “northernlighthouse” is a happy and old customer of etoro. He uses the copy trader feature of the platform and says it’s been working great for him.
Another Reddit user named Travelscott, says FP Markets is a broker that offers one of the lowest spreads starting from 0.0 pips and the slippage offers are also lower.
A Quora user named Walter, enlists Capital.com as one of the top brokers for its overall service. He says capital.com has a wide provision of assets. It charges very low cost and tight spreads.
A Quora user, Devin Dellas, puts CoinEx as the best broker for scalping as it offers low spreads, low commission and super fast execution.
The best scalping forex brokers are regulated, reputable and follow ECN rules. It offers competitive spreads and minimal commission. It also has policies in place to protect clients’ funds. The brokers provide secure and efficient platforms for mobile, desktop and web use.
The brokerage platform with high speed and good trading instruments is favoured in scalping. A broker that offers no dealing desk and high speed execution, preferably electronic communication network execution, is ideal for scalping. For a good scalping experience, traders should go for those brokers that offer low spreads for scalping.
Forex pairs like EUR/USD and GBP/USD are suitable for scalping. A regulated and authorised broker provides safety to its clients. Various policies including AML policies and negative balance protection policies are set in place by brokers to ensure the safety of their client’s funds. Additionally, brokers store the funds of their clients in top tier banks and segregated accounts for the safety purpose. Top scalping forex brokers have good customer support and offer multiple means to contact. Lastly, the companies need to offer rich educational resources, tutorials and tools to guide and educate their clients.
Q & A
- Capital.com is overall the best scalping forex broker.
- eToro comes next with its copy trading tools.
- FP Markets- best scalping broker with low spreads
- coinEx- best scalping broker for trading instruments
- FBS is the best high-leverage forex broker.
Scalping trading can be fruitful when a good strategy is used. Scalpers will need a rigorous risk management system and a broker that offers powerful tools, competitive fees, and tight spreads. Implementing a strict exit strategy is crucial for turning small gains into larger profits.
Pepperstone is the best broker for scalping crypto. It offers fairer, speedier and has some of the lowest fees.
FP Markets offer very competitive spreads for scalping. For example, the trading spread offered by FP Markets for EUR/USD is 0.2 pips.
FBS is the forex broker that offers the highest leverage in scalping. FBS offers maximum leverage of 1:3000 to place scalping orders.
Almost all non-US regulated forex brokers for scalping also allow hedging. Capital.com, eToro and Eightcap are some forex brokers for scalping who allow hedging.
Not all forex brokers allow scalping. So it is advisable to research before choosing. Capital.com and eToro are the best forex brokers that allow scalping.
Scalping can be beginner friendly if proper strategies are adopted. A 1-minute scalping strategy is ideal for beginners as it does not require extensive knowledge of the market.
Day trading involves trading for hours and you close your trading within 24 hours, while scalping is done in minutes. Scalping requires impatience, quick thinking and vigilance while day trading requires an intermediate level of vigilance and concentration. Both have their pros and cons so it’s better to choose according to your taste and personality.
The profit or loss per trade that can be accepted will depend on the time frame that you are using. With 1 minute of scalping, a profit of around 5 pips per trade can be expected. 1-minute scalping is suitable for beginners.