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- What is Forex Scalping first of all?
- XM’s Best Account Type for Scalping
- Scalping is “ultra-short-term trading”
- Advantages and disadvantages of scalping trading
- 4 advantages of scalping trade
- 5 disadvantages of scalping trade
- Why is scalping prohibited by some Forex brokers?
- Tips of Forex Scalping Trade
- The currency pair suitable for scalping is EUR/USD
- London Market Time is recommended
- Always follow the trend
- The target price range is “5 – 10 pips”
- Appropriate stop loss is “about 3-7 pips”
- Money management is important for scalping
- Technical analysis with”Bollinger Bands” and “MACD”
- Entry timing “Sign that the trend continues”
- Monitor a short time frame
- Traders who are recommended to do Scalping
- Start trading from only a few dollars
What is Forex Scalping first of all?
Scalping is a trading style that trades in a short amount of time.
Although the profit margin is small, it is a trading method with a high winning rate that can generate profits.
With Scalping strategy, you can increase profits while managing the number of transactions with a chart that moves in a certain direction.
In this article, we have summarized scalping roughly, so if you feel that it seems to suit you, please read on and practice trading while grasping the image of scalping.
To perform scalping and make a profit, you must have a live trading account first.
We will first introduce the best trading account type for scalping strategy.
XM’s Best Account Type for Scalping
XM, one of the largest MT4 and MT5 Forex brokers, has been a popular choice among traders who perform “Scalping” strategy.
XM has a number of trading account types, and the result of your scalping trades can largely depend on the account type you choose, due to the difference of the symbol, leverage, trading cost and spread.
So which XM’s account type is the best for scalping strategy?
Both account type provides you with raw spread which is the lowest Forex spread XM can provide.
XM’s raw spread starts from 0.0 pips, thus it is the optimal trading condition for traders.
Both XM Zero and Ultra-Low Spread account types involve certain “trading commission” which you must consider while trading.
Even when including the trading commissions, the total trading cost per lot is very small compared to other account types.
You can see more about XM’s trading account types and trading conditions in XM Official Website.
Scalping is “ultra-short-term trading”
Scalping is an investment method that trades in a short period of seconds to tens of seconds.
Day trading, which is also the catalyst for the personal investment boom, is one of the short-term trades that makes a profit by repeating trading within tens of minutes to hours.
A “swing trade” that reads the medium-term trends in the market and holds a position for days to weeks is a medium-term trade.
And “position trading” is a long-term investment with positions for weeks to months and in some cases years.
XM is also a suitable choice for Swing trade and Day trade.
Advantages and disadvantages of scalping trade
Scalping, which makes profits by repeating transactions many times in a short period of time, has both advantages and disadvantages.
Whether or not you are suitable for scalping trading will be a point that will affect the profits of future trading, so let’s understand the advantages and disadvantages and incorporate them into your trading style.
4 advantages of scalping trade
First, we will explain the 4 benefits of scalping trade.
1. You can trade with low risk
One of the great advantages of scalping is that you can trade with low risk.
The reason is that you can finish trading in a short period of time, so when you wake up the next day, you don’t have a risk to make a big loss, thus there is basically no failure, and stop-loss is also done in the real-time.
Therefore, scalping is a low-risk trading style.
With the proper stop loss, situations that would significantly reduce margins would be largely avoided.
Of course, even with scalping, it is quite possible to get big profits by increasing positions and leveraging, and in that case, keep in mind that the loss will also increase accordingly.
XM’s MT4 and MT5 trading platforms also help you see the charts in real-time and execute orders in milliseconds.
2. You can trade in a short time
One of the great advantages of scalping is that the time required for one transaction is short.
This method is suitable for businessmen traders such as office workers who have a main job and it is difficult to take a lot of time on weekdays because the time he/she can spare for trading is short.
Since the FX market is booming all over the world after the evening, scalping allows short-term pinpoint trading according to the market trend
It may be profitable for a few hours a day, or even a 5 or 10-minute transaction if you don’t have the time, and it is popular not only with day workers but also with housewives.
With XM, you can open live trading accounts for free, and trade Forex and CFDs anywhere and anytime using your mobile phones.
3. You can gain trading experience quickly
Investors who want to make money with Forex need experience in the market in addition to basic knowledge.
Another advantage of scalping is that you can quickly obtain that experience value.
It is a trading style that is suitable for getting a sense of trading because it is a method of repeating buying and selling repeatedly in a very short time at the right timing.
4. No need to read market trends
Reading market trends is an important technique in trading styles other than scalping.
Analyzing which direction the price will move in the future is essential for considering entry points when trading in the medium to long term such as day trading, swing trading, position trading, etc., but in scalping, the above idea is not always necessary.
The reason is that scalping is a method of accumulating profits using the waves of charts on a short time axis such as 1 minute, so it is not always necessary to identify trends.
It is not always necessary to identify the trend, and compared to other trading styles, it is easy for people who are new to the Forex calendar to get involved and there is a high possibility that they will make a profit, which is also a big advantage of scalping.
XM allows any kinds of trading strategies on both MT4 and MT5 trading platforms.
5 disadvantages of scalping trade
Next, we will explain the 5 disadvantages of scalping.
1. You have to pay spreads many times
When scalping with Forex, the bottleneck is always the spread (transaction cost).
If you are opening an account with XM, they have set a fairly narrow spread in major currencies, especially when using XM Zero and Ultra Low Spread account.
Therefore, the spread is not so high at one time.
However, even if the amount of each trade is small, the more trades you make, the more spreads you will pay to the Forex broker.
Scalping is the most costly trading style because the more you trade in a short period of time, the more spreads you pay.
2. Slippage can be invisible cost
Forex orders do not always fill at the requested price.
The difference between this requested price and the actual bid price is called slippage.
Like spreads, slippage could occur with every order.
Be aware that in scalping, slippage of a few pips will nullify the profit.
This is also one of the disadvantages hidden in scalping.
However, it is possible to minimize the loss due to slippage by using XM’s trading account with high execution quality.
3. You have to keep looking at the chart
The timing of having a position is the most important to make a profit with scalping.
You are recommended to use 1-minute or 5-minute bars to quickly place an order at the timing when the short market trend reverses.
Of course, even if you place an order properly, you will not be able to make a profit, so you must place an order at the right time.
Until then, you need to focus on the market.
As you can see by actually trying it, it uses a lot of concentration, so it is very easy to get tired even with short transactions every day.
4. Not suitable for unstable internet environment
When scalping trade, what you need to know is the problem of the Internet environment.
With scalping, a loss of 1 second is a loss, so you need to fill your order instantly in a stable internet environment.
If you want to sit down and scalping, trade in a stable internet environment.
XM’s trading server itself processes orders in milliseconds, so if your order is being executed with a delay, then you may need to check your device/computer and internet connection.
You can also find more information about XM’s trading server and how the broker processes orders in the official website.
5. A possibility of violating broker’s policy
It’s a big headline, but with manual scalping, you don’t have to worry too much.
However, it is also true that Forex companies are keeping an eye on ultra-short-term trading, like HFT (High Frequency Trading).
The target of the penalty is often the high-speed trading using a type of tool called flash trading, mainly using high-performance personal computers and automatic trading software.
Scalping trade is done within a short-term, instant transaction rather than a very short-term transaction that trades thousands of times per second.
Therefore, it does not apply to general investors who carefully check the movement of the chart and manually place orders and settle.
XM allows standard scalping trades and other various trading strategies on MT4 and MT5.
In case you are seeking to perform extreme scalping of HFT trading, then you may open an account with Yadix, one of the best FX Brokers for Scalping and High-Frequency Trading (HFT).
Why is scalping prohibited by some Forex brokers?
Depending on the Forex company, there may be a statement in the trading rules that “buying and selling in the short term is prohibited”.
This indirectly prohibits scalping.
The reasons are that “scalping puts a heavy load on the server of the Forex broker” and “For Forex traders, short-term trading is disadvantageous for Forex companies”.
However, none of them were actually announced by the Forex brokers, and they are just predictive reasons.
It seems that some traders have actually traded scalping and the accounts got frozen.
With such Forex brokers, it seems that there are many cases where “when a trader traded hundreds of times a day with a large amount of tens of millions of funds, the account was frozen.”
Therefore, unless you “perform scalping several tens of times a day with funds in the millions of dollars”, you may not need to worry about the account freeze.
Especially with XM, the broker allows any kinds of trading strategies on the trading platforms, so you do not need to worry about it at all.
Tips of Forex Scalping Trade
In this chapter, we will finally explain scalping concretely from the buying and selling perspectives.
We also explain when to have a position, which is the most important thing in scalping, and more.
1. The currency pair suitable for scalping is EUR/USD
A condition for currency pairs that are good for scalping is narrow spreads.
EUR/USD meets that requirement.
In recent years, the spread of EUR/USD has become narrower depending on the Forex company, so scalping is relatively effective.
Moreover, the width of the waves tends to be wider than the EUR/JPY due to the nature of EUR/USD fluctuating over a narrow range.
Therefore, depending on the conditions, EUR/USD can be said to be a currency pair suitable for scalping above EUR/JPY.
The pound sterling has a slightly wider spread, but the price range that moves in a short time is more than EUR/USD, so in some situations, you can make a bigger profit in a short time with GBP pairs.
However, be aware that GBP currency is highly volatile and the risk is high.
With XM, you can benefit from the narrow spread on any account types, especially on XM Zero and Ultra Low Spread account types.
2. London Market Time is recommended
The conditions for the time zone suitable for scalping are:
- Market liquidity is high;
- The spread is narrow.
Therefore, the best time for scalping is from the opening of European markets to the closing of the London market.
Especially the time suitable for scalping is after the opening of the New York market.
Conversely, time in the Asian market tends to be less liquid and wider spreads.
Unless the market reaches a stable period and there is special material such as the remarks of VIPs from each country, it often goes up and down within a specific range.
3. Always follow the trend
Scalping is basically done in a straightforward manner.
Propagation is a method of buying or selling in the same direction as the trend and is suitable for ultra-short-term trading such as scalping.
It is a method that is also used by many professional individual investors, and it is recommended for Forex beginners, especially when they are just starting Forex, to get a sense of the market price by repeating proactive trading.
And the difficulty when using a method other than scalping is that you need to read a temporary reversal point of the market.
With scalping, you basically settle before the turning points, so even people who find it difficult to buy squeeze, whether it is an uptrend or a downtrend, can trade in a straightforward manner.
However, if the market is in the range, the contrarian is more advantageous.
To follow the trend, Fundamental Analysis is also an important part of work.
By opening an account with XM, you can access to XM’s Economic Calendar for Fundamental Analysis for free.
4. The target price range is “5 – 10 pips”
The price range you should aim for when scalping is about “5 to 10 pips”.
It may fluctuate a little, taking into account the superiority and inferiority of buying and spreads.
In scalping, the trend of the whole market is not so important, and the emphasis is on which market moves at this moment.
Buy or sell in a straightforward manner, and while observing price movements, make a short-term trade and take profit margins.
5. Appropriate stop loss is “about 3-7 pips”
As mentioned above, scalping aims for a profit of 5 – 10 pips.
In this case, considering “small loss and large profit”, it can be said that the appropriate stop loss range for scalping is about 3 to 7 pips.
The basic stop loss method for scalping is to make an entry in a forward trade and cut the loss as soon as the price advances in the opposite direction.
We recommend that you use OCO orders and IFD orders to place stop settlement orders for the allowable loss pips at the time of entry as much as possible.
With XM’s MT4 and MT5 trading platforms, you can place many types of standard and advanced orders including the above.
6. Money management is important for scalping
Scalping is a trading method that repeats entry and settlement in the short term.
However, there are many investors who misunderstand the entry timing and the loss swells, leaving the loss in the hope that it will reverse someday.
In addition, there are some people who think that they will definitely win this time and set more currencies than usual without any grounds to enter.
If you do this, you will usually lose, and in the worst case you will have a big loss and you will not be able to trade.
The most important thing in scalping is to set your own trading rules and follow them properly, such as “how much loss will be cut off” and “set an upper limit on the number of currencies”.
“Money management” is indispensable for calculating the allowable range of loss and the upper limit of the number of currencies.
7. Technical analysis with”Bollinger Bands” and “MACD”
Scalping trades are basically characterized by the use of technical analysis.
Recommended indicators are technical indicators such as Bollinger Bands and MACD.
Scalping trade will use graphs that help with such buying and selling to plan entry timing, profitability, and loss cut timing.
8. Entry timing “Sign that the trend continues”
Scalping’s basic investment strategy is “progressive trading.”
Therefore, basically, it can be said that the entry condition suitable for scalping is when there is a “sign that the trend continues” appears in the technical analysis/oscillator index.
For example, the timing when the moving average is tilted upward due to the uptrend or the latest high price is broken due to the uptrend can be said to be the entry chance for scalping.
9. Monitor a short time frame
In scalping, you should look at shorter timeframes compared to day trading and swing trading.
Basically, you should see 1-minute and 5-minute bars, but in some cases, it is seconds to 15-minute bars.
However, please note that if you use only short timeframes, there is a higher possibility that the opposite trend will appear compared to long timeframes.
It is recommended to distinguish between 30-minute and 15-minute bars when performing chart analysis, and short-time bars such as 1-minute and 5-minute bars when entering.
Open XM account and download XM Mobile Apps for account and trading management today.
Traders who are recommended to do Scalping
Scalping accumulates profits by repeating trades many times in a day.
Even from a beginner’s point of view, it is a trading method that has a strong image as a method for an FX trader, but it is also unsuitable for scalping.
Some people are good at scalping, others are not, and whether or not to choose scalping trade depends not only on the person’s personality but also on the currency pair you want to trade and the time of day you can trade.
In this chapter, we will introduce in detail what conditions are suitable for scalping.
Some people may not be able to judge whether scalping is suitable for them based on the advantages and disadvantages alone.
Therefore, we will give the author’s view on the personality that is suitable for scalping.
1. Forex beginners are suitable for scalping
Scalping does not require any special skills or tricks other than the timing of the positions.
Therefore, it is a method that is relatively likely to be profitable even for beginners.
Of course, it is not necessary to dye in one color of scalping, and each medium- to long-term trading style has its advantages.
However, in terms of simplicity and ease of attachment, scalping that allows you to trade quickly should make the sense of trading fun for Forex beginners.
If you are new to Forex trading, then you are recommended to start trading with the Demo account with virtual money first.
With XM, you can open a demo trading account for free.
2. Traders with concentration and instantaneous are suitable for scalping
For scalping, you need to stare at the screen of your computer or smartphone and wait until it is time to buy or sell.
Therefore, it requires a great deal of concentration, and it also requires the ability to act immediately when a trading opportunity arises.
If you are not good at staring a screen and concentrating to trade continuously, then you may seek for other options such as earning swap points.
Earning swap points is suited for traders who like to analyze the long-term market trends, and earn stable profits daily.
3. Traders with strong emotional mentality are suitable for scalping
In order to make constant profits with scalping, you need not only concentration and quickness, but also strong mentality that is not affected by emotions.
If you are overwhelmed by emotions at the top and bottom of the chart and get lost in your decision, you will miss the opportunity.
Scalping trade requires a cold operation that handles everything mechanically, whether it is profit taking or loss cutting.
Even at the timing when the chart moves in a direction different from your expectation and a big loss occurs, in order to protect the assets and not increase the loss anymore, the machine is sometimes based on the loss cut rule without feelings, which you may not be prepared to do.
If you feel you are not ready to trade in a live trading account, then you may open an account with XM to get $30 No Deposit Bonus for free.
4. Sensitive traders are not suitable for scalping
Scalping does not require much knowledge and can be done at a small cost, so forex beginners tend to trade sensuously.
Even if you can win temporarily with a sensory trade, it is difficult to keep winning in the long run as it is.
Scalping is one of the trading methods that even beginners can easily get involved in, but even when scalping, you trade based on your own analysis and way of thinking, and when you lose money, you lose firmly according to the rules you set.
The shortcut to improving Forex is to cultivate a trading sense so that you can cut it, and improve your skills while examining the contents of the transaction.
Start trading from only a few dollars
Are you interested in trading with XM now?
XM is known as the largest MT4 Forex broker in the world, and there are millions of traders who are trading with XM.
To start trading Forex and CFDs with XM, you do not need to make a deposit of a large amount of fund.
XM acepts deposits from only 5 USD, and you can actually start trading with such a small amount of fund by utilizing XM’s high leverage up to 1:888.
You can visit the page here to see XM’s All Deposit and Withdrawal Options and its Conditions.
Visit the page here to see the instruction of making a deposit to XM’s live trading account.
XM also accepts deposit of a large amount of fund, and for safety, XM takes a several measures to protect it investors’ funds.
While you can start trading Forex with a small amount, you are recommended to deposit enough amount to support your positions in order to avoid stop out.
When making a deposit to XM, make sure to complete account validation with documents so you will be also able to withdraw your profits smoothly.
There are some required documents to complete account validation with XM, and you can find more information in the page here.