How to Find Best Brokers for Scalping

How to Find Best Brokers for Scalping

Finding brokers in general and for scalping, in particular, can be as easy as just googling the best brokers for scalping and you can find long lists of brokers, and sometimes a shortlist though, suggested by a variety of websites that most of them don’t give a damn about the quality of the brokers. They haven’t even tried the brokers, however, some of them give you informative information about the brokers and some take the more honest approach and truly try to help you.

On the other hand, there are so-called unbiased websites in which people can give their experience and post their opinions and also rate the brokers. Sometimes, it can be eye-opening especially when you find one start rating and all point to a specific angle, but sometimes there are irrelevant nagging about an aspect of a broker that some clients are not fully familiar with, so they think they are scammed.

For example, they haven’t read the rules of a service such as bounces or they’ve submitted wrong information to the broker. as a result, they’ve violated broker’s terms and conditions and then they think the broker has fooled them, therefore, they write a bad review about the broker.

Having said that, the best way to choose a broker is to test it by yourself based on the necessary metrics for your strategy, so you can find the best one that suits you.

These are the factors that I personally consider and have some experience about them. There may be other aspects that other people look into regarding their strategies, but for me, these are the main ones and I apply them to find the best broker for my scalping strategy.

You can also check the broker section of this site where I’ve been testing brokers for scalping according to these factors.

1- See Whether the Broker Is Regulated or Not

This is a factor that we should be careful about while choosing a broker in general and it’s even more important when we have scalping strategy because many brokers have problems with this style of trading.

Needless to say that no one wants to give their money to unreliable brokers that are not under the watch of authoritative financial bodies for what they do. Having regulation makes them accountable and provides better conditions for trading.

There are various regulatory bodies in different countries but they are not the same in terms of authority and importance. As a rule of thumbs, regulation from developed countries are the best ones and better than those from developing countries, and regulation from developing countries is more reliable than those from underdeveloped countries — the stronger economy the better regulation.

Some of the most reliable and popular ones are:

  • United Kingdom – Financial Services Authority (FSA)
  • United States- National Futures Association (NFA)
  • Australia – Australian Securities and Investments Commission (ASIC)
  • Japan- The Financial Services Agency (FSA)
  • Canada- The Investment Industry Regulatory Organization of Canada (IIROC)
  • Switzerland- Swiss Financial Market Supervisory Authority (FINMA)
  • Hong Kong- Securities Futures Commission (SFC)

The second regulation category which is still reliable but they are less authoritative than the first ones are:

  • Cyprus- Cyprus Securities & Exchange Commission (CySEC)
  • Russia- Central Bank of Russia (CBR)
  • South Africa- Financial Services Board in South Africa (FSB)  
  • United Arab Emirates- Dubai Financial Services Authority (DFSA)
  • China- China Banking Regulatory Commission (CBRC)

The financial bodies in the third category has the lowest importance and easier to be regulated by. Some of the regulatory in this category are:

  • Cayman Islands- Cayman Islands Monetary Authority (CIMA)
  • British Virgin Islands- BVI Financial Services Commission (FSC)
  • Belize- International Financial Services Commission (IFSC)

There are other financial regulatory bodies that you can put them in these three categories based on their economy’s strength.

With all that said, however, you sometimes find a broker with appealing conditions which is right up to your alley but the regulation is not the favorite ones. In this case, if you are using rather small accounts, you can give it a chance and test it more to see how it performs. But they should be regulated by at least a financial body. Don’t open accounts with the brokers that don’t have any regulations.

Regulation is a general factor we should consider when we intend to choose a broker but there are specific factors that we need to pay heed to when we have a scalping strategy.

2- Ask About Terms and Conditions of Brokers for Scalping

This is very important and the first and easiest thing you can do before opening an account with them. It takes you less than one minute to press the pop-up live chat and ask the customer service if they accept scalping strategies.

If they say no, you can easily move on and try to find another broker but if they say yes, you can ask them to show you the page about scalping terms.

There might be some kind of limitation on the maximum open positions which may be important for expert advisors or robots if your strategy is of this kind.

One of the most important one that brokers don’t like and I’ve seen a lot is that they don’t accept less than 3 pips for TPs. If your targets are 3 or less, they clear your positions and profits and probably your account as well. So if you have such take profits, you’d better check that.

3- Find Best Type of Account Tailored for Your Strategy

Long time ago, when I started trading we didn’t have many choices in terms of types of brokers. Most of the brokers were DD or market makers. They had fixed spread and all the spreads were 3 or 4 times bigger than fixed spreads nowadays.

There were a few brokers that had ECN accounts but not for any types of accounts. For most of them, you had to open 10k or more to be eligible for ECN accounts and the leverage for that type of accounts was very low, sometimes 1:10 and in some cases 1:1 that made it hard for most of scalping strategies.

Nowadays we have more options with far better conditions. Even fixed spreads are now much lower than before. Moreover, we have STP or STP/ECN brokers that offer various types of accounts with different conditions. The competition is very high that you sometimes get less than 1 pip spread for very small accounts or the worst types of brokers’ account.

anyway, Now that you know the broker accepts scalping, you should take a look at the types of accounts they offer.

Sometimes brokers advertise that they offer very low spreads or floating spreads for STP accounts or even zero spread for ECN accounts but the overall condition of those accounts may not be as you desire.

For example, they do have ECN accounts with zero spread and just commission, but the minimum deposit of that type of account is not what you want and is higher than you expected.

For instance, I have a side strategy with pretty aggressive money management, so I like to open small accounts for that purpose, sometimes as low as $10.

Many brokers that offer good conditions for scalping; offer micro, or mini accounts as low as $5 or $10 and sometimes no limit for first deposit but most of the time, if not all the time, this account has very different conditions compared to what they put stress on their advertisements.

Another item you should check is leverage. If you open a lot of positions, you need more leverage. Not to mention that leverage can be a double-edged sword and you really need to know what you are doing otherwise you get a margin call which means an empty account in this case.

As a general rule, you should use lower leverage for larger accounts so you don’t get devastated if everything goes south or if you get stuck in a losing streak, which means having many losing trades in a row.

All in all, you should check every item of offering accounts so that you can decide which one suits your scalping strategy.

Yes, some brokers apparently have satisfying atmosphere for scalping but they don’t mention what types of accounts are eligible for those nice offerings. So, before getting excited, check if your condition meets theirs.

4- Check for Low Spreads and Test Them

Obviously, this is the most specific factor you need to examine for scalping strategies. The smaller your targets are the more important this factor becomes.

First thing first, you should look at the spread of a broker in general to see if they are suitable for your strategy. You may like the broker and the extra tools that they offer or any other aspects of their services, but their spreads are not tailored for your TPs or SLs.

Secondly, you should check the spreads while trading to see the average spreads you get and if they are close to what the broker claims.

Some good brokers release their average spreads so you can be more confident about the spreads you receive, however, in this case, you should still test them to see if they are the same as what the broker claims.

You can test them in a demo account first but it’s not enough. Sometimes you see different behavior from a broker in its demo and live accounts so you’d better check them in a live account as well, at least in a small one.

Bigger accounts may have different and better conditions than small ones so you may not be able to figure out how a factor like spread acts in them if you test a small account, however, you can get an acceptable understanding of the performance of the broker. If they perform competently in small accounts, they would probably do well in bigger accounts as well.

5- Test Order Execution

Fast and correct order execution is vital for scalping strategies. You have limited time to act and a few pips to gather so not having instant execution or getting a different price from what you order is a killer to every scalping strategy.

There are some problems such as slippage and requotes that need to be tested and you have to make sure that you don’t get them too often.

If you want to know more information about requotes and slippage you can check this post.

The best scenario and the utopia of scalpers is not to stumble upon them at all but in reality, we all know that they happen every now and then. The question is how often do they happen?

Normally, you get them in two specific occasions. First, when the market has low liquidity and move very slowly, for example, when New York session is closed and Sydney has just started. Second, when the market is highly volatile, like when important news comes out.

There are two ways you can test a broker and you should test it on mentioned situations for several times — the more the better.

The first way is to open instant positions to see if you see any slippages or requotes. A few of them sporadically is not a big deal but frequently is not a good sign and you better avoid the broker.

The second way is by setting limit orders such as buy stop or sell limit to see how the broker executes the orders. If you don’t see any differences between the price you order and the executed price when your orders are triggered, the broker is doing its job correctly but if you see any gaps, it’s a serious red flag because limit orders must be implemented as they are.

When you set limit orders, you show the price you want to the broker. It means you don’t want any other prices, so if the broker opens your positions at a different price, they force you to enter the market where you don’t want. I don’t like when that happens and it seems a highly suspicious behavior to me.

So do those two scenarios several times in the mentioned conditions before choosing a broker.

6- See If the Broker Has Your Usual Trading Platform

This doesn’t normally make a broker a good or bad one but it’s important for your trading. Scalping needs rapid decision-making and a copious amount of concentration. You don’t have extra time to mess around with your platform and discover new features.

Go with the ones that you are used to it and your eyes and mind are adapted to. If you see a platform and decide to shift to, make sure to spend enough time to become comfortable with it, however, it’s not a good idea to change your platform in a short period of time before scalping.

The Bottom Line

Considering a few factors in the first place can save you a lot of time and energy in the future. You may not need to pay attention to some of them if you are a position or swing trader but as a scalper, they can be the difference between being a profitable trader and losing your account.

I’d rather spend one or two weeks searching to find best brokers for scalping than have various problems with the wrong broker I’ve chosen.

If you want to see my experience with different brokers, you can follow the broker section of this site. You may also find good brokers for your scalping strategy as well.

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