In your opinion...

[wasupnow14]

Which brokers are the best for handling news traders? I've heard that some MM brokers will lock you out if they think you're scalping. Are there any that dont and do not hike up rates largely before a news release?

Additionally, can anyone reccomend to me a good ECN based platform?

[tymen1]

To Tess :

While you are posting, Tess, I thought I would ask you a question which is appropriate on this thread. I have asked this question before on this forum but never got a decent answer.

The question :

Why do brokers not like scalping? So how does scalping interfere with their procedures?

Then finally, how many pips is called scalping, ie how many pips do you have to make before a broker (on the average) considers you are not scalping?

Kind regards, Tymen Wortel, Perth, Western Australia.

[Tess]

Hey Tymen,

They don't like it because they have difficulty laying off those positions into the market.

The odd small sized (less than the normal market size) trade here & there won't particularly bother them, but if they begin to experience quite a large portion of regualar 'fast timeframe' activity, then obviously it could begin to impact on their risk & profit model.

Their business models aren't set up or designed to accommodate this type of trading activity, therefore they actively repel it.

It's the primary reason they refused to continue to guarantee stops & limits a while back, especially around economic releases. It was simply a license to print money for 'straddle traders'

Once a retail trader begins to increase their fast timeframe activity (upon a successful model), & most definitely their trade size, the brokers will begin making life difficult.

As to how many pips define scalping? To be honest, it's more the style of trading rather than the pip count which these retail brokers take umbridge to.

The very fact their spreads are normally larger than 2 pips across most pairs, deems it unrealistic that a retailer will return a profit over the mid to long term. The cost to risk ratio is simply unplayable.

But, generally a trader attempting to snaffle less that 5-10 pips over several round trips per session will certainly alert them to this activity, especially if the majority of these trades are positive in their returns.

And as for trading over news releases?...forget it as a business model over the mid to long term, again particularly if you're executing via a traditional retail broker.

[Tess]

I will add however, don't confuse 'scalping' with intra-day trading.

They are very different operational procedures. Brokers won't have any problems with folks taking a couple of intraday positions as the ebb & flow of price activity meanders thru the trading day.

Sensible positioning & risk covering is very different from price shaving & attempting to steal a few pips off the back of price variances.

So, a trader executing a 'long' at the beginning of the London shift & returning 20-30 pips - & subsequently initiating a short a few hours later with similar objectives, won't attract undue attention.

As long as the practice doesn't involve rapid fire & multi-positional activity, you'll be fine. If you wish to adopt that type of game plan, then there are facilities available out there for such trading activity.. ie: ECN's

[tymen1]

Thanks Tess,

At last a quality and also a comprehensive answer. This question had me puzzled for a long time.

I am wiser now.

Trust also that others viewing your posts here are also wiser!!

Kind regards, Tymen Wortel, Perth, Western Australia.