Forex Trading Strategy with Scalping – 3
In this section we will discuss the most important variables that are sometimes forgotten by forex traders are brokers or brokerage companies. Especially for scalper, broker is a very important variable and very determine the possible profitability of scalping strategy used.
In this section we will discuss the most important variables that are sometimes forgotten by forex traders, brokers or broker companies. Especially for scalper, broker is a very important variable and very determine the possible profitability of scalping strategy used. Scalper often talks about his trading strategy, stop loss and take profit or time frame trading, but rarely heed the stability of the server from brokers, spreads that can sometimes change or the possibility of brokers cheat or commonly called a scam broker.
Currently there are hundreds of brokers operating in the forex retail market. Each has the technical capabilities and customized business model to match different trader profiles. Differences in the broker is not so important for long-term traders, for the swing trader there is little influence but not significant, but for daily traders and scalpers become very important because it is directly related to profit or loss. Here are the things about brokers that need to be considered if you are a forex scalper:
Basically spread is the cost that you must pay both profit and loss to the broker for his services. A trader who does not use scalping may only open and close orders in one or two positions. Although the cost due to the spread is still important, but for traders who have been successful with trading strategies spread costs or brokerage services can still be tolerated and considered reasonable. But the situation is very different for a scalper who opens and closes the position of dozens of times in a relatively short time, even more than a hundred times a day. The cost of a spread can be very significant and must be carefully calculated.
For example a scalper opens and closes 30 positions in a day on EUR / USD whose spread is 3 pip, with fixed lot size and profit of 2/3 from opened position.With the average profit per trade 5 pip and average loss of 3 pips then no cost due to the total spread profit / loss obtained is:
Profit / net loss = (profit position) – (loss position)
= (20 X 5) – (10 X 3) = + 70 pips total.
The results obtained are quite significant. Taking into account the costs due to spread, then:
Profit / net loss = (profit position) – (position of loss + cost of cadence pread)
= (20 X 5) – (10 X 3 + 30 X 3) = -20 pips total.
Yes, the results are disappointing. Although the number of trades that profit 2 times from the trade loss, and the average loss is almost half the profit average, but with the cost due to spreads that counted become somewhat out of estimation. Under the same conditions, to achieve breakeven, the average profit must be 9 pips per trade.
What if the scalper goes to a broker with a spread of only 1 pip for EUR / USD? Under the same conditions as the previous assumptions, then take into account the costs due to the spread profit / loss net
= (20 X 5) – (10 X 3 + 30 X 1) = +40 pip total.
Why the results can be so different? Because in addition to obtaining profit from the trade, the scalper must also pay the cost due to spread to the broker for each position opened either profit or loss. Thus a scalper must choose a broker that gives the lowest possible spreads especially in a liquid currency.
Comprehensive technical analysis
Scalping method involves technical analysis. With low time frames often used by scalpers, fundamental effects can hardly be seen proportionally and often overlooked by scalpers. Scalpers always focus on the pattern of action and reaction of price movements that occur from time to time, therefore they are in need of a complete and qualified technical analysis tools. In this case many brokers who have provided technical analysis tools are quite complete and adequate on trading platform.
Especially for brokers using the popular trading platform Metatrader, some allow traders to use all types of Expert Advisor (EA), but there are also brokers that restrict traders using certain EAs. EA is a program installed on the Metatrader platform terminal and written with MetaQuotes Language 4 (MOL 4) (for the latest version), used as an analysis for automated trading. EA is programmed to manage all trading activities automatically in accordance with trading methods and strategies, so traders do not have to worry about errors analysis especially if planning to open a lot of trading positions.
EA has been quite popular among scalpers lately and is used as a major trading tool. Many parties sell EA with ready-made trading features or accept EA-making services according to the desired features of the trader, there are even brokers who sell EA and there is also a free give as a complement to the trading facilities of its customers or clients. But whatever is the broker’s policy regarding the use of EA, it’s good that the scalper first test the EA that will be used in the broker’s demo account.