Why Brokers Hate Scalping Strategies
Get Fibonacci Retracement Secret Method FREE that pulls 500+ pips per trade. Read this 40 page Forex Robot World Cup Insider Robot on the potential of forex robots and the secrets of automated trading success. Watch these 6 Triple Threat FX Trading Psychology Video Series FREE that reveal a weird trading technique responsible for billions earned. Brokers hate scalpers. If you are a scalping or thinking about using scalping as a trading strategy than you should this fact that most of the time brokers don’t allow it. The reason is this that a broker needs time to move money when it is traded. You see, a broker is acting as a market maker for its clients. So the broker is forced to execute the client’s buy/sell order even when the liquidity in the overall market is low.
I give you an example, suppose you are trading 10 lots of EURGBP. The market suddenly moves in the wrong direction 3 pips in just under two minutes. You get scared and close your trade immediately. You are out of the trade but your broker is stuck with this money in the system.
What this means is that the broker may not be able to pass this transaction in the interbank market for sometimes! So the brokers don’t like scalpers. What they want is a trader who trades long term or is a position trader so that they are able to clear the transactions in the interbank market without risk.
If you are trading a mini account then too you are causing problems for your broker. A broker has to accumulate many mini lots together and lump them into a standard lot before offsetting it into the interbank market.
Now many forex brokers use computer software to identify which one of their clients is using scalping consistently. Scalping means losing profits for the broker! So if the broker determines that you are a scalper and causing them to a profit loss, they are definitely going to take action. That action maybe a sudden banning of your account, my friend!
However, things are changing as banks are also entering into the retail market. Forex brokers may lose their business in the market as more and more banks enter directly into the retail market. But banks are also as aggressive against scalpers as brokers. Some brokers have very lean operations. They just have a website and a small support staff. They can license the MetaTrader Platform to an outside server that specializes in it. They can also outsource the dealing desk to another broker. You will be surprised at how much consolidation has taken place in the retail forex market over the last few years. What to do if your broker does not allow you to scalp? Always look for an ECN.
