Let me get this point, maybe am missing something I hear people talking about scalping a pair with a very tight spread .
But is there any pair that has less than 3-pip spread?..
Like IMI says, try EurUsd, smallest spread available as its the most traded pair
Yes - Cable and EUR/USD for a start, but others, too.
Here’s the [I][U]key point[/U][/I] you need to appreciate, Gibbytech: scalpers are [B][U]not[/U][/B] using counterparty market-makers with wide spread, as their broker.
They obviously wouldn’t want to, and that kind of broker wouldn’t tolerate a successful scalper for long anyway!
A genuine broker is perfectly happy for his clients to scalp [B][U]the market[/U][/B], but a counterparty broker can’t afford for his clients to scalp [B][U]him[/U][/B], can he? It’s all about “Who holds the other side of your trade”.
I sincerely appreciate those points @Lexys. Though the aspect you mentioned of counter party broker got me confused .
What sort of broker can we say fits this description.
Thanks for your swift response.
Pair that has low spread like as eurusd and usdjpy maybe will more preferable for scalping trader, eurusd on daily movement has good average movement while usdjpy also as one pair that sometime having good movement if any trader can trade well on this pair also will profitable for scalping
Ok, let’s see if I can explain this (no promises!) … :8:
Let’s start with a “definition”. There are two kinds of brokers.
First, there are genuine brokers: a “broker” is someone who executes on his client’s behalf a trade in a market to which the client doesn’t himself have access, and in this case this would be the “interbank market”. The broker isn’t in any way involved in the trade’s outcome - he just executes it (technically “executes [U]them[/U]”: the opening and the closing transactions) in exchange for a commission. It makes no difference to his own wallet whether the client wins or loses, but he’s running a business and wants to keep his clients and have them trading, because the more of them there are, and the more transactions they do, the more commissions the broker earns. Key concept: this broker prefers his clients to [B][U]win[/U][/B].
Secondly, there are counterparty market-makers. These people hold the other trade of your trade. You’re not dealing in the interbank market at all, when you use one: you’re trading against them. They hold the other side of your bet. (They also hold all your deposited funds, make up their own prices which may or may not closely replicate interbank prices, add on “spreads”, and make up all the rules governing the transactions as well. They’re not on your side, though they typically pretend to be.) Key concept: this broker prefers his clients to [B][U]lose[/U][/B].
So, how do you know which is which? A genuine broker (such as “Intractive Brokers”) will always have a much higher minimum deposit requirement ($10,000 or so, typically), and will explain clearly on their website that they’re not a counterparty market-maker. I think it’s fair to say that 90%+ of this forum’s members (especially those very near the start of their trading experience) are using counterparty market-makers. Though there are also quite a few of us here who do this for our livings, who are using brokers like “Interactive Brokers”.
And the relevance to scalping …
A counterparty market-maker can’t afford to have a winning scalper on his books, because he’s paying the losses himself. He holds the losing bet, when the client wins. And a scalper can’t afford to use a counterparty market-maker anyway, because the spreads are (by comparison) enormous, and the dealing costs would be bigger than his profits. A three-pip spread would be 100% useless for scalping.
“Scalpers” usually trade in large size (many lots) and go into a trade for seconds or a minute or two, hoping to snatch a pip or two, with a very tight stop-loss, and have a very high win-rate. It’s a whole different world of trading, really. Some institutional traders do it. Some independent (“retail-ish”) traders do it, too - the ones I know who do it successfully are ex-institutional traders, the people who have saved up their annual bonus payments to use as trading capital for their own accounts, and “gone private/independent”.
I’m a “semi-scalper”, myself (at the most: I often aim for 8 pips profit, and that’s not really “scalping” at all).
Have I clarified it, or made it more confusing? :8:
@ Lexys your explanation is clear thanks very much…from your explanation
I can summarize it by saying that non counterparty market brokers are the best for scalpers,but usually requires huge capital to open and an account.
And they are know for their very tight spread unlike a counterparty broker.
And up to 90% of traders has a counterparty Broker as their Broker.
How this applies to me…
My broker definitely falls to the category of a counterparty Broker , because you can open an account with as low as $100 .
And has a minimum spread of 3-pips for Eur/USD Eur/JPY etc.
But I see myself becoming a semi scalper like yourself because . you have to make 3-pips for your broker first before you talk of your profit.
Since I want to minimize risk I all target few pips maybe 6 to 8
I also want to minimize risk by reducing my startup capital to the maximum I can afford to lose according to the rules right?
Well, ok, but please excuse my mentioning that this is a truly [I]horrible[/I] spread for EUR/USD.
Even using a small account and a counterparty market-maker, nobody should be paying more than one pip spread on the Euro. I know it sounds like a small difference, but at three pips, one would be paying three times the necessary dealing costs every time one traded! I haven’t looked at these brokers for a long time, but I’m really surprised that there [U]are[/U] three-pip spreads on the Euro. That’s unmanageable.
I recommend that you have a look at Oanda. In my opinion, they’re about as good, decent, honest, ethical and reliable as you can get for a counterparty market-maker (in other words, probably not 100%, but close enough for most people, most of the time), and their spread on the Euro is often under a pip, and never more than about 1.2 pips during regular trading hours. (I still have access to my old account there, though I almost never use it, so that’s one I do know.)
I hear you, but I think the logic there isn’t necessarily quite right. You need to look at minimizing risk collectively, really, rather on an “individual trade basis”.
It’s a big and important issue, because long-term successful trading is all about risk-management.
I’m not trying to suggest that you’re wrong (and you may not be, at all), but equally, don’t assume that doing 6-8 pip trades is going to minimize risk. It may not. Trading with a 20-pip target and a 30-pip stop-loss - strange though it sounds! - can even work out less risky than 6-8 pip trades, [I][U]overall[/U][/I], if your win-rate’s high enough. You need to calculate this with things like “profit factor” and so on.
This beginners’ book will be [B][U]really[/U][/B] helpful to you: “[I]Profitability and Systematic Trading[/I]” by Michael Harris (Wiley 2007).
I think so, if I understand you correctly. In that nobody should trade forex with the rent-money, or money they can’t afford to lose. A lot of that has to do with working out position-sizing according to your worst-expected losing runs and losing patches, and so on (explained by Harris).
One thing is for sure, though: if you’re aiming at “small-sized trades” (e.g. 8 pips or whatever) a 3-pip spread will make it effectively [U]impossible[/U] for you to make long-term profits. You’ll need spreads of a [B]maximum[/B] of about 1 pip, for that to be viable, and that’s “in experienced hands”.
Small-scale, frequent forex trades (e.g. targets of 10 pips or less) [I]can[/I] be [U]very[/U] steadily profitable, it’s true, but that kind of trading also needs long hours, lots of patience and discipline, low dealing-costs, and some experience (on a demo account!). If you’re interested in learning how to do it, I [B][U]strongly[/U][/B] recommend Bob Volman’s books on the subject - and there’s a great big chunk of one of them available free of charge as a PDF on one of his websites, if you want to try a “free taste”.
Wow I have really learned so much on this topic. Let me take some time to digest these information I appreciate all your contributions special thanks to you Lexys .
Further contributions to this topic is appreciated…
Gibbytech, Lexys has given you some really solid advice here!
But scalping is not only a question of spread and pip targets. As you have no doubt noticed already, markets can and do oscillate irratically whether they are trending or ranging. If you are looking for lots of small trades then you also need a very precise trading strategy that pinpoints entry points very accurately. At this level of trading, entry levels and timing are extremely important. Very often the price can hover around the same price for a long time and then maybe pullback 8-10 pips and only then move in the desired direction. For this kind of trading to be viable and worthwhile you need a high success rate and a currency pair that generates plenty of signals.
For this, amongst other things, you need to consider what currency pair(s), what timeframe you are going to trade, what market times you are going to watch and a very simple, but clear strategy. Personally, for this kind of volume trading it is best to only concentrate on one pair and pick one or two sessions of maximum 3-4 hours at a time - otherwise you are unlikely to sustain your concentration sufficiently. Also without a clear and crisp strategy you will tend to overtrade and lose as much as you gain. There is little that depresses one more than making some good profits during a session only to lose 2-3 hours intense work in a couple of rash, loose trades.
Lexys has posted before some simple trading strategies before which might be of some use to you if she still has them? Lexys? What do you think?
I think I’ve put up three or four little strategies, somewhere, that I’ve used long ago - the problem is that they’re all in different threads and I don’t keep links to them, or anything. And the forum’s “advanced search” function leaves quite a bit to be desired, it must be said …
I found this one and this one but I’m not even quite sure if these are quite the kind of thing you meant, Manxx? :8:
Hi Lexys,
Yes I think both of these give a good idea of the kind of strategy and trading discipline needed for this kind of trading - or what do you think?
Funny really, I have recently been trying to move to more long term trading but it just isn’t me! I guess I have always been a short-term “scalper” and always will be. I really do agree with you that, with the right strategy and the right discipline, it is possible to make good regular steady income from this kind of trading -as well as the luxury of being able to pick and choose when one wants to trade! 
Thanks, Lexys…
Best pair for scalping in my opinion is EUR/USD as most brokers have a low spread on it. I have used EUR/USD pair for scalping today and got a positive pips, although small pips but it was a positive trade.
I am also thinking if pair eurusd is having lowest spread usually and this good for scalping trader I think, and might another option is pair usdjpy, this is also having low spread, and will not good for scalpig if use pair that has big spread fee like as gbpjpy
Here- thisis the closest thing to having a money printing machine if you can master. The strategy will work in all market environments.
XAUUSD asia
how long is a piece of string ? :32:
the nature of the relationship between 2 currencies is heavily dependent on many things …Timeframe traded , timezone and naturally the news events , economic conditions in play at that time
not to mention things like the spread of course and you do have a very very complex mix of dynamics in play !
If we are discussing the G8 then heres my take
Currency 1 - would suggest the [B][U]USD[/U][/B] …solid , anchor currency , easily tradable all platforms , lowest spread for all pairs , carry trade pattern generally
then you have a tougher choice and it will mainly be dependent on your preference for risk vs return vs volatility , ATR etc etc …and again timeframe is a huge factor …
higher volatility pairings - GBP,Yen,CAD ,NZD
lower volatility pairings - EUR,AUD
Swissie is the exception of course as they track so tight…so I cant be bothered with it .perhaps some advanced range trading but not really relevant to what I do
hope this helps buddy …just my thoughts
N
Hello lexys, how do you know which broker is a market-maker? Is there a list of brokers who is genuine and whos not?
They normally state very prominently on their website that they’re not (if they’re not). The overwhelming majority of “forex brokers” are counterparty market-makers, and that’s why there’s usually so much adverse publicity about them online.
The ones who are genuine brokers all offer futures-trading as well, and have much, much higher minimum deposit requirements (in the thousands, not the hundreds).
You can safely assume that any “forex broker” accepting small deposits and offering very high leverage is a counterparty trader. Also anyone offering “bonuses”, “competitions”, other gimmicks, and anyone doing a lot of advertising/promotion is a market-maker.
It’s also possible to check, independently, with their regulator (they state on their websites by whom they’re regulated) whether they’re a counterparty market-maker.
I strongly advise you to avoid brokers registered in “light regulation” countries (Russia, Cyprus, Africa, the Caribbean, etc.). There are reasons that “brokers” choose to be registered and regulated in those countries, and they’re not reasons that are in their clients’ interests. UK and US regulation are far more in the clients’ interest.
“Interactive Brokers” and “AMP” are both genuine brokers, and the two that spring to mind. IB typically has slightly lower dealing-costs/commissions and AMP typically has more user-friendly customer service.
For anyone who needs to use a counterparty market-maker (and many people do), personally I recommend Oanda and I advise people to keep well away from FXCM. Personal opinion only, there.
I have to agree, even as a newbie to Forex (but a veteran of internet marketing). I clicked on one of FXCM’s popup ads earlier today while studying in school of pipsology and after starting to read the small print immediately closed their page and made a mental note to never go near them with a 10-foot pole. They do not have clients’ interests anywhere near the top of their list of priorities, that is 100% for sure. And even though I would have been interested to read the free e-book they were offering there was no way on God’s earth I was giving them any of my personal information to get it. Just my personal opinion