Forex Trading Strategy with Scalping – 4

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Forex Trading Strategy with Scalping – 4

As part 3 continues about the important things of forex brokers that scalpers should pay attention to, in section 4 we will discuss brokers’ policies on scalping methods, types of brokers that are suitable for scalper, slippage, requotes and spread spreads that greatly affect scalpers when trading .

As part 3 continues about the important things of forex brokers that scalpers should pay attention to, in section 4 we will discuss brokers’ policies on scalping methods, types of brokers that are suitable for scalper, slippage, requotes and spread spreads that greatly affect scalpers when trading .

Scalping policy

With definitions and limits on scalping, forex brokers determine several rules such as the minimum pip size for stop loss and profit targets, as well as other provisions related to scalping. Although the majority of leading forex brokers allow clients to implement scalping methods freely, some brokers strictly prohibit the use of scalping techniques in trading. In addition there are brokers who do not expressly prohibit scalping methods, but process their order clients who are suspected of implementing scalping very slowly so that scalping methods become unprofitable and even tend to be detrimental.

Regardless of the presumption of an dishonest broker, to be safe and comfortable in trading, the scalper should choose the type of broker that is a Non Dealing Desk (NDD). At brokers that belong to this type of NDD client orders will be forwarded directly to markets, financial institutions, large banks or other larger NDD brokers. In this case the client does not trade against the broker, but directly confronts the actual market conditions. Spreads for brokers of this type of NDD vary according to the situation in the real market. If demand and supply in the market are unbalanced then spreads may spread. Included in this type of NDD broker are:

– Broker type ECN (Electronic Communication Network) : at this type of broker the client can directly interact with the market without intervention from the broker or dealer (dealing desk). Brokers only benefit from the amount of spreads that have been in mark-up. The workings of ECN type brokers are to bring real-time and real-time sellers and buyers. Although ECN brokers are increasingly popular, scalpers must be vigilant and scrutinize because many brokers claim to be ECN types but full of manipulation. The safest way is to know the regulations of the broker and ask the regulator directly. A credible and correct regulator includes: CFTC and NFA (United States), FSA (UK), ASIC (Australia).

– STP type brokers (Straight Through Processing) : brokers that connect clients with large brokers or ECN type brokers as their liquidators.

– Broker type DMA (Direct Access Market) : the way it works is similar to ECN brokers only this type of DMA broker is bound by a contract with a particular liquiditor.

Scalpers should avoid brokers that are not properly regulated and commonly called bucket shop brokers or street brokers. They often outwit clients who are still laymen and do not know the true trading mechanism in the forex market. The inconvenience that is often done by brokers of this type is slow order execution, excessive requotes, and servers that are sometimes disconnected (down). There are also those who call this type of broker a market maker where the broker creates a market from the buyers and sellers of his own client, and if the volume is insufficient the broker will cover the shortcomings. Scalping methods that open and close positions in large numbers and short periods of time are clearly inefficient for market maker brokers, therefore they tend not to like scalping techniques by slowing down access to the system, or even prohibiting scalping techniques from being used.

Forex Scalping Strategy

Slippage, requote and spread widening

If there is a slippage or price jump, then the scalper will be very likely to experience losses especially if they use pending orders or automated trading software, where stop loss and profit targets have been determined. Slippage usually occurs when market price fluctuations are very high, and what often comes is a stop order, which is buy stop, sell stop and include stop loss.

Require or reorder requests because of the unavailability of the price we order in the market also often occur when the price fluctuations are high, only this happens to the order we do at that instant (instant execution). Spread of spreads can occur when demand and supply in the market are unbalanced, for example when many are in a buy position or vice versa many are selling as they happen when important news releases or market sentiments are strengthening.

Both slippage, requotes and widening spreads do not often occur but are difficult to avoid because we cannot predict when price fluctuations will be high. What is certain is that the scalper can avoid trading when an important news release has a high impact.

Forex Trading Strategy with Scalping – 1

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Forex Trading Strategy with Scalping – 3

Forex Trading Strategy with Scalping – 5

Forex Trading Strategy with Scalping – 6

 

 

 

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