Why do some brokers prohibit scalping? (conclusion)

Scalping is popular trading style. Traders love to scalp. Nevertheless, some brokers prohibit scalping or advertise " Scalping is allowed!" ( I have seen many banners on the forums). So what is the idea? Traders are making money with the scalping. Brokers don't like that. Where is the logic?! I came to the conclusion that scalping is the most profitable way of trading or there are more profitable scalper traders than others.

Why not make new rules like couldn't hold the position longer than an hour, day, week or 6 hours and 28 minutes

Regards,

Josef

I don't understand that either....and i've see it some times!

If traders don't earn money, they don't stay in business, so how do brokers earn money?

Best regards

Theoretically a broker should make money based on spreads and commission.

Thanks to the recent broker failures we learned that on top of spreads and commissions they also make money trading on the market and they do that with your money.

I'm pretty sure that the main source of money for brokerage firms today is gambling on the market (again with your money) so they need a stable core capital and also influx of new money.

Anything that will threaten this model just can't go for long. The broker will stop it.

Brokers invest a lot in advertising because they know that once you got hooked, even if you blow your account you will find a way to come back.

Scalping teaches you to get in and out of the market quick.

Getting in the market does not bother the broker, but getting out is something that scare them because you cut your losses. Thats why virtualy all brokers have a "demo" account. Demo accounts teaches you to hang on to losers.

Brokers hate traders that cut their losses as soon as possible.

Brokers need a lot more losers than winners to survive so they can't afford anything that gives you an advantage

Ok. Those are very interesting points...

But if they make money using ours, wouldn't it be better for them that I had a big account?

If the broker is not hedging positions you take all your losses are broker $$ so they earn more than their comission. Some make money that way. That's it!

Others like FXCM will only bet over making money with spread & spicing up that with some kinky slippage always against you.

13

If you are a new customer opening a new account yes.

But if you are a winner, for the broker is like taking money from one pocket and putting on the other, because the money you win comes from other accounts that are losing.

For as long as you don't withdraw money thats still ok for them. But as soon as you start making and withdrawing serious money the broker will kick you out.

Brokers need a lot of loser, losing slowly but surely. People that lose slowly tend to refund their accounts.

They need a more or less stable core capital and client base so while trading with clients money they still milk them via spreads and commissions.

Also when they hedge, their hedges have to be profitable for their liquidity provider. If the bank they do business with starts to lose money with them what you think will happen.

ok....now I understand it better.

Anyway, I haven't withdrawed money for now.....let's see what will happen when I do it!

Thanks!
Hatzerim

Hi 13,

Orders with FXCM are filled based on available on liquidity and can experience either positive or negative slippage. Limit and limit entry orders can be used to maximize positive slippage during trading which is why we highlight the usage of limits on our website for entering and exiting trades. And we also have statistics showing the number of orders and order types that experience positive or negative slippage, which you can see here www.fxcm.com//forex-price-improvements.jsp

Jason

Simple fact is, brokers have no time to place the actual trade within the market when traders scalp. Therefore, if a trade is open and closed within seconds, the broker foots the bill for the costs of the trade.

If you place a trade and its open for during time of good liquidity, then there is no problem as the broker can execute the position (hedge or against) your trade within seconds, otherwise during times with less liquidity and the trade is open and closed within a very short time span (scalp), the broker foots the bill for their failure to place an actual position in the market.

Some brokers work off ECN, I would suggest you dump the likes of the brokers who have posted here and get EBS.

well if you love your Forex broker scalp. you are only making him richer

They are taking the other side of the trade, thats why, typical dealing desk broker behaviour,
can you imagine a small dealing desk brokers work? he sits at his desk and are forced to take the oposit side on all trades,
what if all clients where scalpers, there would sometimes be hundreds of orders coming in simulaniously, they simply have no time to hedge them all,
sweat is pooring from the guys head and he is cursing like a madman, the trick is ofcourse to forbid scalping alltogether, larger more suited brokers have this running automaticly on a computer programs, so they wont mind if you find such broker today, avoid!

Scalping is a completely different style, it requires strong discipline, quick decision-making, and the ability to react instantly to market movements.

I think that was the case in the past, where scalping was extremely popular....
but i dont think the case is relevant now.
The reason the brokers didnt liek scalping is obvious - they didnt want to lose money It is like stealing their "edge".
U cant enter the game and have your own "the house always wins" system DD
But if u find such brokers - just avoid them, that is it , so easy...go find another