Scalping with Pepperstone

Scalping is a timeframe which involves trading on very short periods to extract multiple small profits. We can deploy a wide range of strategies in a ‘scalp’, be it momentum, mean reversion, support/resistance, but essentially, we are trying to capture small degrees of movement from the market.

This can be more intense than swing or position trading and ideally requires the trader to be in front of the screens or to automate the strategy – each candle matters and being able to react real-time is key. At Pepperstone, scalping is actively practised, and we can see that in our average hold times across instruments, and typically we see people scalping off 15- or 30-minute charts, but some will go down to 5 minutes or even lower.

Due to the short timeframe by which the trader is utilising the strategy, a rules-based approach (even if trading discretionary) can be highly advantageous, as this can help control the emotion that comes with ultra-short-term trading. It can help mitigate overtrading and overconfidence, which can lead to ruin.

The risk to reward trade-off when scalping is determined by strategy, as is the win ratio.

Scalping often leads to a higher frequency of trading and traders can trade multiple times per day, so in essence, scalping is a low margin high volume business. Given the higher frequency often the biggest headwind to profitability is transactional costs, so reducing your trading costs is essential given the smaller gains underlying the strategy. This requires superior liquidity and razor sharp spreads. Pepperstone’s razor account is the perfect vehicle for scalpers to use as it offers access to raw spreads from 0.0 pips with a commission charge applied. This allows scalpers with a high frequency of trades to move in and out of positions at a lower cost.

The other key consideration for scalpers is liquidity. Liquidity is the ease at which a trader can get in and out of a position at the quoted price, without having to be filled at worse prices further down the order book. Pepperstone offers exceptional liquidity, allowing one to have all of their FX trades filled in full (99.6% fill rate based on December 2021), fast execution and no partial execution or requotes on market orders. There is no dealing desk intervention, our quotes are directly from our liquidity providers. Our liquidity conditions we provide to clients is considered one of the best of the Meta Trader brokers. During volatile conditions having access to liquidity is very important. The below graphic is a hypothetical example of how liquidity can affect your cost to trade over 100 trades.

We also offer over 1200 different instruments for scalping clients to trade, in order to take advantage of the dynamic nature of market opportunities. Our customer support is award-winning, available 24hours 5 days per week, and 18hours a day on weekends (Weekend support times could vary). We have a number of licenses across different regions with the necessary regulator, ensuring your money is protected.