Best Forex Brokers for Scalping in 2023
If you are a scalper looking to enjoy the best trading conditions for short-term trades, you should definitely read this comprehensive guide that details the best scalping Forex brokers in the market.
We do more than just offer you a list of top forex brokers supporting scalping. We provide in-depth information on what is scalping in Forex, the benefits and drawbacks of adopting a Forex scalping strategy, Forex scalping indicators supported by the numerous platforms, and how to scalp Forex successfully. However, we should warn you that, as an FX scalper, you should be prepared for the volatility of the markets and the high-risk nature of trading. That being said, let us get started.
Top Scalping Forex Brokers
|XM||Min. Deposit: $5||Max. Leverage: 1:1000||
||Visit XM XM review|
|AvaTrade||Min. Deposit: $200||Max. Leverage: 1:400||
||Visit AvaTrade AvaTrade review|
|IG||Min. Deposit: -||Max. Leverage: 1:200||
||Visit IG IG review|
|FXTM||Min. Deposit: $50||Max. Leverage: 1:2000||
||Visit FXTM FXTM review|
What Is Forex Scalping?
Scalping is a trading strategy involving extremely short-term trades, in which a trader pounces on the market to grab a few pips and then exits their positions within seconds or a few minutes. In conventional trading, traders often get into trades with a specific target, which is determined through detailed market analysis, evaluation of the underlying trends, calculation of the risk-to-reward ratio, and consideration of several other trade parameters.
However, such a strategy can be quite time-consuming and requires a massive trading capital. Some trades run for hours, days, weeks, or even months. Therefore, such an approach requires the trader to be willing to accept the market volatility and be sufficiently emotionally and intellectually competent to hold on to their positions for a long time.
In the world of modern retail trading, almost all traders are short on time due to their life pursuits. Many may not have access to a large amount of money to trade the markets conventionally. This is why scalping has seen an exponential rise in popularity among retail traders, with highly volatile markets like Forex and CFDs offering amazing opportunities for traders to make substantial profits within short periods. To understand how a scalper approaches the market and what scalping in the Forex market entails, let us look at an example.
A Deeper Look at Scalping Forex Markets
To understand how to scalp Forex, let us consider one of the best currency pairs for scalping, EUR/USD. In a hypothetical scenario, let us assume that the current exchange rate of the EUR/USD pair is 1.1250. This implies that one has to pay $1.1250 for every €1.00. Although the real-time quotes in FX trading terminals are presented in figures of up to four decimal points, some of the best forex scalping brokers may quote up to five decimal points for reasons we are about to explain.
The measure of movement in a currency pair is called a pip, with one pip in the EUR/USD pair being a change of exchange rate value from 1.1250 to 1.1249 or 1.1251. The movement can be on either side of the market. If the price rises, the base currency appreciates; if the price drops, it leads to a drop in the value of the base currency against the quote currency.
If you are trading with your account’s base currency denominated in US Dollars, one pip is equal to $10 for every standard lot. One standard lot equates to 100,000 units of the base currency, which is €100,000 for the EUR/USD pair. Therefore, if you catch a 10-pip move with one standard lot, your final profit will be $100, minus any spreads and commissions.
Market Volatility and Pips
The markets are active around the clock for five days a week. With over $7 trillion worth of daily transactions, the FX market, especially the EUR/USD pair, sees significant volatility during active market hours. As a result, the EUR/USD pair can change anywhere from 10 pips to 100 pips within a few minutes or even seconds. These movements are even more prominent during news events, during which the pair has historically moved over 200 pips in just a second; however, these extreme movements are quite rare and very risky to traders.
Profits from Pips
Since the movements are quite volatile, the best scalping Forex brokers add one further decimal point to their quotes to present accurate exchange rates, with even more flexibility in calculating pips. A $100 profit from a 10-pip move in a standard lot account is just 0.1% profit, which may not sound like much from a retail trader’s perspective. These traders may also not have the resources to trade with a €100,000 account, which is where mini/micro lot trading accounts and leverage come into play. These accounts allow traders to start trading with just $10, with a maximum leverage of up to 1:2000.
Forex Scalping Strategy
When we consider the same hypothetical scenario with a micro lot account that provides leverage of 1:1000, where one micro lot is equal to 1000 units of the base currency, we can understand the insane profit potential of a Forex scalping strategy. In this scenario, a 10-pip move with one micro lot traded at a 1:1000 leverage gives a profit of $100. You can easily open a one micro lot position with a $100 account, which means you can achieve a 100% profit within a few seconds or minutes.
However, on the downside, the same magnitude of the market movement against your position will result in a margin call, which will wipe out your entire trading capital. Often, a move against your position will trigger a margin call at a much smaller pip movement, due to spreads, commissions, and slippages.
How to Scalp Forex, the Two-Edged Sword
Things get interesting when an intelligent trader finds a good Forex scalping strategy or a Forex scalping indicator that is consistent in finding profitable short-term trades from the market with a very high probability of success. These strategies can often rake in anywhere from 50 to 1000 pips a day, from very small to massive moves in the market, with each trade taking less than a few minutes from open to close.
If this is done properly with proper risk management and responsible use of leverage, scalpers often find themselves outperforming seasoned swing traders with very little capital outlay and minimal risk. While the best scalping Forex brokers are not bothered by the trading strategies of scalpers, some brokers may not be entirely receptive to such tactics.
Why Do Some Brokers Frown Upon Successful FX Scalpers and High-Frequency Traders?
Brokers are categorized into different types according to their dealing desk policies. These include market maker, ECN/STP/NDD, and hybrid protocols, with each broker providing an order execution protocol that suits their overall brokerage strategy. ECN/STP/NDD brokers are the best Forex brokers since they follow a no-dealing desk policy. All orders are passed directly to the interbank liquidity pool.
These brokers only act as intermediaries to trade and do not countertrade against their clients. ECN/STP/NDD brokers also have the most competitive spreads, which allows scalpers and high-frequency traders to enjoy massive costs in trading, alongside other trading-based advantages.
On the other hand, market makers create markets for their retail clients, and almost all orders are matched internally through an internal dealing desk. Therefore, some brokers may act as counterparties to their clients’ positions to offer liquidity, which leads to a direct conflict of interest between the broker and trader. Here, the broker wins the money if the trader loses, and vice versa. As a result, a broker anticipates its traders will lose money.
With over 90% of traders losing money in the markets, this is a profitable business model for market makers. For traders who enjoy winning and losing trades, brokers may indulge in questionable tactics to induce their clients to fail, ensuring that the house always has the edge.
However, if a trader finds success in the markets through a strong Forex scalping strategy or if they use a Forex scalping indicator that allows them to profit consistently, a market maker may start losing huge sums of money. If the trader is smart enough to stay safe from the broker’s questionable tactics, then there is no way such brokers can limit their traders’ profit potential. Therefore, such brokers find it in their best interest to ban all scalping strategies. This is why you should always choose the best scalping Forex brokers for short-term trades.
You can choose either an ECN/STP/NDD broker or at the very least a hybrid broker. Hybrid brokers adopt a combination of the market maker and ECN/STP/NDD protocols, in which they are most likely to send orders to a liquidity pool if they cannot match them internally due to a lack of liquidity. Hybrid brokers have a lower conflict of interest than market makers. They are often safer than market makers but not as reliable or free of conflict of interest as a no-dealing desk company.
A Few Compelling Reasons Why You Should Choose the Best Scalping Forex Brokers
Here are a few reasons why you should scalp Forex with the top brokerages in the market:
- They allow scalpers to employ all types of trading strategies without any restrictions.
- They offer the most competitive trading conditions for direct market access trading with minimal to no conflict of interest.
- The spreads and commissions are very low, reducing overall trading costs for high-frequency traders.
- You can employ Forex scalping indicators and EAs for automated trading without restrictions.
- Top companies offer comprehensive market analytics and trade signals that help scalpers with their trade decisions.
- The best forex broker for scalping is regulated and offers a secure environment for your capital.
Importance of Developing a Good Forex Scalping Strategy for Consistent Profits
The first step to achieving consistent profits for a short-term trader is developing a good Forex scalping strategy. You may not find success overnight; as with any business, you need to develop skill through knowledge and acquire experience before becoming a scalper. Scalping is a high-risk strategy employed in one of the most volatile financial instruments in the world, so you must be emotionally prepared to deal with all the risks that come with short-term high-frequency trading.
Of course, developing an FX scalp strategy is just the beginning. You should also find the right brokerage partner to implement these strategies, since even a mere 2-pip difference in pricing can mean the difference between a winning and losing trade. Therefore, only the best scalping Forex brokers can provide you with the best order execution conditions, tight spreads, competitive commissions, and efficient platforms to help you scalp the FX markets with the utmost precision.
The Downsides of Scalping – What Is Scalping in Forex Risk?
A scalper faces many risks in the market. We recommend our readers make themselves aware of all the risks and disadvantages before they learn how to scalp Forex instruments.
- Scalpers without proper risk and money management strategies will lose money in the long term.
- A scalper may fall into the trap of trying to get rich quickly, leveraging more than necessary, and end up facing a margin call.
- The market will punish an undisciplined trader — especially the highly volatile FX market.
- Almost all Forex scalping strategies are emotionally draining and may negatively affect mental and physical health.
- Scalp trades involve placing multiple trades a day, meaning the trade costs can be significantly higher than in regular trading.
- Even a profitable Forex scalping indicator can fail many times due to changes in the underlying market conditions, such as news events, economic turmoil, war, and other micro/macro-economic factors.
- It is easy for scalpers to blur the line between professional trading and gambling in the markets, so it is imperative to stick to a trading plan and never deviate from your strategy.
Who Should Register an Account with the Best Scalping Forex Brokers?
Short-term high-frequency trading is not a suitable strategy for most traders, primarily due to the volatility of the FX market. However, long-term swing trading is also not feasible for smaller retail traders, due to high margin requirements. If you wish become a scalper, you must adopt a strategy that suits your risk appetite and investment goals.
If you are not worried about being glued to the screens every day and prefer working with shorter time frames, then scalping is certainly a reliable way of earning consistent profits in the FX market. However, you must exercise proper caution while using leverage and sound money management to ensure you reap the rewards of a good Forex scalping strategy. Make it a priority to choose the best scalping Forex brokers so that you get the best trade platform, outstanding order execution policies, and guaranteed safety of your funds.