It’s important to remember that not all brokers allow scalping on their platforms. Typically scalping is only allowed on accounts that are operated on ECN platforms. Not only is the ECN trading condition generally better for scalpers in terms of execution speeds and in terms of having a no-slippage environment, it can also be better for ECN brokers as the greater number of trades taken by scalpers will lead to more commissions being earned from both trade entries and trade exits.
On that note, here are five things to consider when choosing a broker for scalping:
- What is the broker’s policy concerning scalping?
Usually, brokers will indicate in their Terms and Conditions document whether scalping is allowed on their platforms or not.
- Where is your broker located?
There are jurisdictions where the regulators of the forex industry have rules that specifically prohibit scalping. Therefore, you need to know if the broker you intend to use is located in such a jurisdiction.
- Is it an ECN Broker?
As stated earlier, scalping is usually acceptable on ECN accounts because a commission is charged for trade entries and exits in addition to spreads. Furthermore, ECN brokers do not act as counterparties, so they have nothing to lose from traders making repeated small profits or losses from scalping. In contrast, market makers do not charge commissions on trades and act as counterparties to trades, so they stand to lose if traders keep making consistent profits from scalping. Many market makers do not allow scalping on their platforms.
- Does the broker have fast price feeds?
In scalping, the speed of entry and exit is essential in setting up a trade. Your intended broker must be able to provide fast price feeds, so you are sure you are getting prices which are up to date. Speed matters and delayed price feeds are detrimental for scalpers.
- What does your broker specifically say about scalping?
Where you have doubts as to what the terms and conditions of your broker say about scalping, you can settle these doubts by contacting the broker directly via email or live chat.
Before you start any account with a broker, ALWAYS and without fail, check thoroughly for complaints and praises for that company. They are readily available in Google.
You can check the broker’s reliability on the basis of their customer service (how much time they take to respond to their clients), trading costs(whether it’s less or more) and most importantly their trading platform(which should be stable and smooth running).