Selection of a broker and currency pair is very important.
There are many dishonest brokers, there can be problems with money withdrawing, trade execution, slippage and many others. If you read few topics from Forex Peace Army you will know what I’m talking about.
It is also important what you trade, on which time frame. Trading EUR/USD and USD/CAD is very different, each currency pair is unique.
Selecting a broker
First, we need to start from most important thing when we talk about scalping – selecting a broker. There are many brokers out there, but only small part of them allow scalping. You can look for all alternatives you have. I can recommend brokers that I use with my daily trading – Yadix and TickMill. They are scalping friendly, they also have an account for scalpers – Check it here and here.
It is not only about spread
What is the difference? It is not only about the low spread. It is about setting stop loss and take-profit orders. With a standard broker you are not allowed to set them nearer than few pips (usually 3-5 pips are minimum). And that is a big problem. Because of that limitation, you can’t scalp.
When you are scalping, you plan to take more trades during a day. If something goes wrong, you close your trade. If you are profitable, you are not holding a position for long period of time. You take small profits. To be able to do that you have to place your stop loss and take profit near to the entry points. For some reason, this is a problem for most brokers and they do not allow that. That is why you want a broker which allows you to scalp.
It is not only a problem for scalping. In normal day trading or trading on lower time frames like 5m, 10m, 15m sometimes you want to move your stop loss near to the entry point or to break even. If the price is near to that level, with most brokers you won’t be able to do that. That is why you want a broker with no limits for stop loss and take profit orders.
Others broker you can check for scalping account:
Selecting currency pair(s)
You want to scalp on Forex pairs where you have low spreads and good volatility. So it is a good idea to stick to major pairs like EUR/USD, GBP/USD, USD/JPY, USD/CHF and few others. If you have a spread around 1 pip or lower than you are good to go.
Another important thing – spread can be higher during news or economic data publications. In some cases, this difference can be huge so make sure that your broker offers decent trading conditions when the market is more volatile because of news.
The last thing – one pair at a time. If there is some strong move on EUR/USD then probably there is a similar strong on other dollar or euro pairs. Do not try to trade few pairs at the same time because in scalping it is not a good thing. Focus on one Forex pair. I recommend starting with EUR/USD or USD/JPY. If you look for more swings and you have good spreads then GBP/JPY can be a good alternative.
But probably you will start from EUR/USD – this is the most popular pair and you should have here the lowest costs of trading.
Most people trade during London and New York sessions. There are few reasons for that:
- better volatility
- market are trending more often
- we have news and economic data release during a day
Asian sessions and scalping
Of course, it does not mean that you can’t scalp during the Asian session. You can, but you should use a trading strategy which works better in conditions like:
- lower volatility
- range moves
If there is no important news during Asian session then very often markets can be quiet. There are times that week is packed with news and important changes and you can see nice trends.
Still, Asian sessions are harder to scalp but you still can find good opportunities. Just check Yen, Aussie and Kiwi pairs. There should be more movement on them during Asian sessions.
How many pips, how many pairs
It depends on trader and strategy. Some scalpers prefer to take just small profit of few pips. The common range is somewhere between 10-30 pips, but some traders prefer to scalp 2-5 pips. I personally do not have a problem to hold trade little bit longer if I see a strong trend.
How may pairs at once
If you are new to scalping then most definitely only one. You have to react fast, follow the price action. It is hard to do that, even with few monitors on board. The other reason is education. Every pair can act a little bit different, trading can be different. It is hard to create and improve your trading strategy when you trade few pairs at the same time.
Of course, you can trade few pairs, but first, you should be profitable when you trade only one. Them, if you feel confident to trade more then go and try it.
Anyway, your choice will be narrowed down to few pairs with best trading conditions (spread, volatility). Remember that these pairs are connected with each other. In the example, when there is some big news about dollar then it can affect both EUR/USD and USD/JPY at the same time. So in many cases, it does not help if you trade similar pairs.
The higher time frame is also important to remember. You should know what is going on on highest TFs. If you want to trade few pairs, you have to follow few higher time frames. For new traders that might be confusing.
How many pips
Think about profit and not about a number of pips. In some situations, you trade with bigger leverage and it is ok to take a quick profit. Sometimes trend will be stronger, important support and resistance lines far away and it will be wise to hold on to trade a little bit longer. So no one magic value here.
Basic info about day trading:
- Forex scalping and day trading for beginners
- Best Forex broker, fx pairs, trading hours for scalping and day trading
- Day trading Bitcoin
- Forex scalping and day trading without indicators
- Time frames in day trading
- Trading desk
Management in day trading:
Indicators in day trading
- Forex ATR – trailing stop loss
- Forex Parabolic SAR
- Moving averages
- Bollinger bands
- Fibonacci retracement
- Support and resistance, Pivot Points