Forex trading is one of the most popular markets worldwide. Some investors are making huge income from trading currencies, thanks to the wide range of strategies they can use. However, even if the market offers the opportunity to trade using numerous strategies, many of the traders prefer several methods.
The most popular one is called scalping. Beginners usually try this strategy because it offers the opportunity to earn huge profits. When using this method, you’re called a scalper, and you have to collaborate with low spread brokers.
Low spread brokers are getting more and more popular in Forex because they provide attractive services. Before jumping into sharing the greatest benefits these brokers provide, there are some things you need to understand.
Do you know what scalping is?
You may have heard of scalping, but you don’t fully understand what this strategy implies. It’s a method that helps you earn more income. You buy a certain currency pair, you hold onto it for a period, and then you sell it for a profit. When scalping, you open and sell the pair in no more than 5 minutes. During the same day, you’ll operate numerous trades, and some will turn profitable while others won’t. You need to understand that when trading by scalping, the gain and loss margin is low.
At the end of the trading session, you’ll have a decent profit because some of the trades you place will turn profitable. A beginner trader can earn around $30 a day, while a seasoned one can reach even $400. No one can guarantee you how much profit you’ll make, but there will be days when you’ll make a good profit.
What advantages do you have if you use the scalping strategy?
Beginner traders prefer this method because it’s simple and safe. If they lose, they have no issues to absorb the loss because it’s low. Because the entire process takes no more than 5 minutes, the trader isn’t exposed to market volatility, so they can control the loss.
This strategy implies using techniques as a stop loss and take profit because they protect the trader from price changes. Even if they lose, the losses are small and they don’t affect the overall budget.
When using this method, traders are worried about the spread because it can influence their trades more than trends do.
All traders can use this strategy, even beginners with a limited budget. Because seasoned investors prefer large profits, there are low chances to opt for this method because the gains are small.
If you want to count on scalping to earn income, you need to be patient because it requires time and dedication.
Can low spread brokers help you?
To place trades, you need financial resources and a broker. Finding the right broker isn’t a simple task because you need to pick the one that better suits your needs. You should consider some factors when choosing one.
The spread the broker offers is an important determinant. All brokers earn a profit through spreads, and with widespread. If you collaborate with a widespread broker then the asking price is higher and the bid price low. This means you’ll pay high prices to buy and earn a low profit when selling. The chances to make income are low. But when working with a low spread broker, you can make a great profit. If you have no experience in Forex trading choose a broker that offers really low spreads on major currency pairs (e.g. EUR/USD).
As stated before, you need to consider some factors before choosing a broker.
- You won’t handle your savings to someone only because they say they are trustworthy. You need to check their credibility to find out if they perform fraudulent operations.
- You should also check the transaction costs because every time you enter a trade you need to pay commission. Understandably, you choose the one with the cheapest rate. Because you established that you need a low spread broker for your transactions you should review the available options.
- An online directory can help you identify the ones that meet your criteria.
- The trading platform the broker offers is also important because you need to ensure it’s easy to use and stable. Before picking a broker check the platform. Check how secure the platform is.
- And last but not least, the customer service the broker provides is crucial. No broker or platform is perfect and you should pick one that provides 24/7 customer support for its clients.
Low spread brokers aren’t for all investors
There are two types of Forex traders, long-term ones and scalpers. If you choose to be a scalper, then you consider Forex trading a side gig and you keep your positions open for less than 30 days. But if you want to enrol in Forex trading as a full-time job, then you will keep the positions open over 30 days.
Because at the start you’ll be a scalper, you’ll work with low spread and low commission brokers because you don’t afford to pay pricey fees. When you gain experience, you can swap to another broker and try other strategies. You’ll afford to pay more for transaction costs. Long-term investors don’t care about the spread because usually the broker asks for 2% of the profit.
But how can you pick a broker? If you use scalping stick with a low spread one. If you prefer long-term investments select a low swap one.
To ideal broker provides the following:
- Low spread and low commission. They generate lower costs than the other brokers.
- Local supporters. When you are facing problems with using their platform, a local expert comes and provides assistance.
- Regulated broker. Chose a broker regulated by your local regulations. F your country doesn’t have regulations for Forex chose one regulated in the USA or Europe.
- It provides a local payment system. The brokers that allow deposit and withdrawal with credit cards and visa cards usually ask high fees. Collaborate with one that provides access to a local payment system.