What is the best pair to scalp?

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: