This might be an unhatched question for experienced traders and I want to start with scalping. What is the significance of spreads for high frequency traders?
Spreads matter, and the tighter your SL or TP if you’re using one, such as in scalping, the harder it will be to maintain a winning profitable scalping system.
But to my mind the worse danger is your broker’s variability of spreads, as volume goes up and down and especially around intra-day events like news announcements, other market opens/closes etc. Bear in mind spreads can go x10 at such times. It won’t be much consolation if you select Broker A who offers a 0.6 pip spread on EUR/USD and reject Broker B who only offers 0.7, if Broker A increases their spreads to 10 pips and Broker B only goes out to 2. Something you can only find out by tracking each one’s quotes (not charts).
Spreads matters depending on trading methods. If you like to put tight stop loss, spreads is very important. Also if your profit target is like 5 to 15 pips spreads is important.
Scalping requires lots of practice and I would recommend opening a demo account and start practicing. If you are successful then go for a live account.
A low spread broker is the only way to survive as a scalper. I’m currently using hotforex, fxview and not facing any major issues with them.
Spread is the charges per transaction made by traders on the broker’s platform. Some brokers’ spreads are quite high, and at the same time some also offer 0 pips spreads. Before starting scalping you need to keep this factor in mind otherwise every transaction will cost you and you will end up in net loss.
Not to forget the commission charges per trade in scalping.
Forex scalping can be very exciting for traders. The promise of “free” cash with a good scalping strategy can make a trader’s head spin and their fingers very trigger happy (by which traders start taking many trades). However, no Forex scalping strategy can be effective without understanding the size of the spread and how to exploit the advantage of low spreads.
I generally avoid scalping, as it’s highly risky and there is a great chance of blowing up your account in a span of a few mins. Until you have mastered the scalping strategy don’t go for it.
True! Idk how I was so naive that I was using a $10 per trade commission broker for so long and scalping. Fortunes changed when I started using fxview ($2 both side commission) and ib (0 dollar commission). Just bear in mind that with ib 0 dollars are only applicable if trade volume is high.
The spreads plays a significance role when you put the trailing stop loss and apart from that I don’t think the spread can affect the scalper.
So this is what I get: only a low commission and a low spread broker (like hotforex) is to be used for scalping. Or else it’s just money down the drain.