Article by Investazor.com
Scalping in trending market or in range?
For a scalper to find the answer for this question it is better to look in himself and in his trading system. As long as the market moves the scalper makes money on the very short term run. He depends on his emotions. If a trader is set to trade in trending markets then he will feel uncomfortable in a range and he will lose money, it goes also the other way around.
It is very important to understand in what kind of trend the price is and trade accordingly. It is pretty hard to find a system that will have the same probability of success in both trending market and range. So a scalper could have even two systems, but he should always know when to change between them.
Do Brokers hate Scalpers?
This is a tricky question because you will find a lot of answers on the internet like:
– Brokers hate scalpers because this kind of trading present low risk and they usually make money, so it is bad for business.
– Brokers do not hate scalpers because they do a lot of trades and pay the spread.
Actually the truth is somewhere in the middle. First of all a scalper should closely look for their broker (you can review our article on how to choose a correct broker). If the brokerage house is trustworthy then it will not have any problem with the clients that makes money. If a trader is unlucky and trade with a scammer (unfortunately there are a lot of these nowadays especially in the derivatives markets and CFDs) then he might have some problems if he makes money from scalping, because the broker could mess with the quotations or the data feed or even the trading software.
One real problem that could appear from scalper for a broker is actually overloading the servers. Because scalpers are making tens of trades per hour and hundreds per day it might occur an overloading of the server. If a broker knows that he has such a problem in his infrastructure then it might put the scalper on a blacklist and sometimes mess with his style of trading.
If you would like to scalp be sure that you will find a trustworthy broker that also has good servers to sustain your type of trading.
Getting rich or enriching the Broker?
This is a pretty good question. Nowadays the beauty of trading is also made by the systems that are fast and allows a trader to scalp, but mostly is made by the low costs. The spreads have dropped hard from several years ago. A trader could have now spreads under 1 pip (for the most traded pairs like EURUSD, GBPUSD, USDJPY).
For a scalper to succeed with his system he would need small spreads and commissions, this way the market can easily cover his costs and assure him a smooth way to profits. Even if he pays a small spread and/or small commissions because he makes a lot of trades he will pay a lot to the broker. In this case it is a win/win situation.
A scalper should thank the broker because he has small spreads and can apply his system while a broker should thank a scalper because he is trading more than other and pays him the fees.
Manual or Automatic scalping?
This question triggers other questions like: Do you know programming or know a friend that knows programming? Automatic scalping or signaling a trade is a very good tool that a scalper could use.
I am not quite a fan of automatic trading, but I accept the fact that it would be easier to program a system which gives you signals or administrates your trading positions. It all depends on your capacity to keep a good focus and respect your scalping system in time. Automatic trading could be a solution if you have a good system and the possibility to program it.
If you did that or want to do it you should know that it isn’t enough to program it and leave it to work. You will always need to tweak and fine tune it since the market is in a continuous change. A human will observe the changes and adjust his trading system while a robot cannot do this all by itself and needs interventions.
Conclusions
Let’s wrap up what it is written in this article. Scalping is just another trading system with some specific characteristics. It is unique because of the fact that scalpers are trading on very short time intervals and are making hundreds of trades per day. This way of trading can be done by novice and advanced traders as long as they understand the risk that it is implied while scalping.
For a scalper to survive and make money with his way of trading he will have to find a good trading system which implies not only a trading strategy (based on fundamental and/or technical analysis) but also on money management and emotions management (this way he will get rid of the emotional pressures). If he will manage to check this on his list he will have a high probability in becoming consistent in his winnings.
As for the question whether a scalper can make money in both trending and sideways markets, the answer is clearly yes, but he will just have to correctly determine in which kind of market is he in. Continuing with the position of the Broker in what concerns the scalper, you saw that there are some factors which influence whether a broker is with or against a scalper even though, in normal conditions they should find themselves in a win/win situation.
As for the last questions, I believe that it is pretty subjective. As I said before, I would prefer to just push myself the buttons to trade but I agree with the fact that Expert Advisors could ease the work of a trader.
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