In this article, we will go over the legality of scaling trading. If you consider scalping as a trading strategy, we list the best regulated brokers for scalping.
Is Scalping Trading Illegal?
Scalping is completely legal. Although it is not illegal, it is not allowed by all brokers. Because of the high volume of trades in a short period, scalping puts pressure on the broker system, so not all brokers allow it.
Scalping is a legal trading strategy.
Brokers that allow it
In general, STP and ECN brokers allow scalping without any restrictions. STP and ECN brokers operate a no dealing desk model which allows them to place your trades directly on the open market. They place trades with their liquidity providers without interference. These brokers profit from spreads and commissions and not by placing counterparty trades to yours.
Brokers that don't allow scalping tend to be market makers. These brokers usually operate through their internal networks and don't always place your trades on the underlying markets. Depending on their risk management tools, some market makers allow it but make sure you read their terms.
PFI Rating: 4.9/5
Pepperstone is our top pick as the best scalping broker. Pepperstone was founded in 2010 and offers CFDs on Forex, Crypto, Shares, Indices, and Cryptocurrencies.
The minimum deposit is $0 and offers a wide variety of deposit methods. Pepperstone is a safe and reliable forex broker regulated by top-tier authorities.
Forex trading fees are low. Pepperstone offers two account types: Razor and Standard.
- Regulated by Top Authorities
- Low Spreads
- No Minimum Deposit
76.6% of retail investor accounts lose money when trading CFDs with this provider
What is a scalping forex trading strategy?
Scalping is a trading strategy that aims to open a high volume of positions in a trading day. The aim is to profit from short-term trades through pip movements. Trades are opened and closed in minutes or even seconds.
What should you look for?
Some brokers are better suited for scalping than others. You need to find a broker that allows scalping and provides you with the best trading conditions.
Here are a few factors to consider when choosing a broker for scalping:
- Make sure the broker allows it
- Low trading fees and commissions – the lower the cost, the less impact it has on your downline. Scalping involves opening many positions and fees can add up quickly.
- Great market liquidity – this ensures you make your trades at optimal prices.
- Fast trade execution – you need a broker with super fast trade execution and avoid slippage.
What Should Scalpers Consider
Just like any other type of trading, scalping involves risks. You need to know the risks and that this particular strategy fits you.
Scalpers place many trades and need to monitor the market constantly to spot potential opportunities. Automated trading and strong technical analysis are something you should be implementing in your scalping trading.
As a scalper, you need to move fast and make immediate decisions. On top, your trading strategy should have exact exit and entry points.
Profit margins in scalping are small so it is worth noting that one notable loss can considerably wipe out your account.
The best time frame for scalping
The best time frame for scalping is between 1 and 15 minutes. While there is no “best” time frame, most traders scalp currency pairs using time frames from 1 to 5 minutes. The 15-minute timeframe is the least popular with most scalping strategies.