Scalping is prohibited by Brokers?

[phildunn]

It is the reply email I received from Marketiva support after I submitted inquiry about scalping.


"After I read the service agreement carefully, I found a clause
about scalping. I am new in FOREX trading and would like to know
what is scalping and why you prohibit it? What is scalping
actually? Is it a hacking technique?"

Scalping is so distinctive technique that there is no chance you will be
applying it, if you do not know what it is. We will not explain you that,
since I will be teaching you an illegal technique on our platform. You can
always go to Google and find definition and forums that discuss that.

We provide our services, with that limitation: no scalping. If someone one
wants to use scalping, that is OK, but it cannot be on our platform. Simple
explanation: there is no way we can execute scalping orders with our
counterparties. All other dealers in the world do not allow that, the only
difference is that we are fair and we say that in advance. There are
techniques that a dealer can use to crush a scalper in one position only. We
simply do not want to do that - we do not want to go into that mud.

If you need more information, please do not hesitate to contact us.

Kind Regards,

David Persena
Dealing Specialist
Marketiva Corporation

What's your opinion about this broker? Are they doing right thing by prohibiting scalping?

 

[JonnyT]

Bargepole.

Use direct market access

JonnyT

 

[kako]

http://www.moneytec.com/forums/showthread.php?t=16510

this is a good thread abt scalping. i define it as:

very quick trades(less than 2~5 mins) with hi leverage in expectation of a low pip target(<10 pips).

HTH

 

[Satori]

I guess what they're saying is that they can't offset scalping orders quickly enough if they need to. A bigger (or, dare I say, 'better') broker would probably be a lot cleverer about the way they cover themselves and may not prohibit scalping.

Although they may have other reasons - I don't know, just guessing.

Quite how they quantify it is another matter. Do thay say trades must be at least so many minutes long? Do they say that trades can only be closed if you're showing a loss or more than so many pips profit?

 

[zdforex]

Here is an example of one person who used scalping. Please check the attachment below, I have not verified the results, and so I am just putting them as were presented to me, Its your judgement. (This was done in less than 24 hours)

ZDforex

 

[nbo2]

That sounds a little like a broker saying in the small print that their customers are only allowed to take on losing trades. As regards the use of the word 'illegal', that is a misrepresenation. It is not illegal to scalp, but few actually win overall doing it for any length of time...

On the other hand, its also fair to say that large numbers of inexperienced traders attempt to trade short/very short term and get smacked around badly in the process, so I'm sure there are those for whom such a rule would be doing them a favour rather than a disservice by perhaps forcing them into fewer better thought out trades riding the trends...

Perhaps? Who knows?????

 

[Anonymous]

It could be scalping is a voodoo practised by witch-doctors, like taking off someone's head, so it is not allowed.

 

[charliechan]

limiting a traders strategy is a big warning sign.

this proves fx is no more than a bucket shop, and scalping is likely to lose them money (make you money), so they dont allow it.

this is why trading the futures markets is so much better - do what you like, and cheaper.

 

[josbarr]

Free comments twice a day

http://www.proedgefx.com/dailyforexbriefing.aspx?ref=JBAR

 

[Anonymous]

Trading futures needs fees, commissions, platform fees, cancellation fees, exchange fees, etc. How can that be cheaper than commission-free FX?

 

[Anonymous]

I came across a book at the Investments section of a bookshop a few days back. The title is something like "Trade like a Sniper" or "Sniper Trader". Can't remember the exact title, I moved on to the magazines section after a short glance at it.

 

[peto]

Trading futures needs fees, commissions, platform fees, cancellation fees, exchange fees, etc. How can that be cheaper than commission-free FX?

Because with,say, Oanda you need a 3 point move to turn a profit (first 2 just cover the spread)
With eur/$ futures a 2 point move will do it (the spread is often 1 point and your commission is about half a point). In fact with limit orders you may be able to sell on ask / buy on bid so the spread works for you.

fees??
platform fees...none depending on broker
cancellation fees....none currently on Globex (a proposal exists to introduce them but it is unlikely to be a problem)
exchange fees....waived by some brokers after say 6 trades a month.

Another advantage is that you are working in a transparent market where you can see exactly what the other market participants are bidding or offering, instead of relying on a bucket-shops quote which may or may not reflect the market price.

 

[Anonymous]

depending on broker

ie. there still are fees if using the wrong broker.

see exactly what the other market participants are bidding or offering

I agree that's useful.

quote which may or may not reflect the market price

For FX which is the market price?

 

[peto]

For FX which is the market price?

fx brokers and spread betting firms can call the price whatever they like, although if it gets too far out of step with other brokers for too long then punters will arb against them, so maybe this is not a big problem.

With futures the price is that which forms a balance between the buyers and the sellers of the contract, which is by definition 'market price'.

Seeing volume is nice too!

Pete

 

[Anonymous]

Does the following mean that, eg. EUR/USD, if I place my stop at 5 pips away from my entry point, and it is hit, I reserve the right to cancell that loss?

Reference:
http://www.swissnetbroker.com/online-broker/online_trading.html

9) Antiscalping Regulations

The low-spread policy and hedging technology used by Dukascopy are unable to eliminate effectively risks of trading strategies known as “scalping”. Taking into consideration this fact, Dukascopy does not provide its services to traders using such strategies. “Scalping” strategies can be used with special accounts opened under Dukascopy’s authorisation.

Should a trader use a “scalping” strategy with a standard live account, Dukascopy reserves the right to cancell all those client’s deals that have profit within 0 to 2 spread values with a particular trading instrument (and less than 6 pips with EUR/USD and USD/JPY). The Antiscalping Regulations are applicable if the profit gained with such deals exceeds 30% of the account total profit.

Reference: http://www.dukascopy.com/swiss/english/etrading/tcond/

8. Antiscalping Regulations

The low-spread policy and hedging technology used by Dukascopy are unable to eliminate effectively risks of trading strategies known as “scalping”. Taking into consideration this fact, Dukascopy does not provide its services to traders using such strategies. “Scalping” strategies can be used with special accounts opened under Dukascopy’s authorisation.

Should a trader use a “scalping” strategy with a standard live account, Dukascopy reserves the right to cancell all those client’s deals that have profit within 0 to 2 spread values with a particular trading instrument (and less than 6 pips with EUR/USD and USD/JPY). The Antiscalping Regulations are applicable if the profit gained with such deals exceeds 30% of the account total profit.

 

[onurene]

hehe, talking about the holy grail, lol
but i dont think they are talking about negative profit though.

 

[Anonymous]

That is what they mean isn't it?

There are two parties to a buy-sell contract. One party's Take-Profit point is the other party's Cut-Loss point. If one party takes profit at 5 pips from entry the other cuts loss at 5 pips, having the bid ask advantage of 1.8 pips the other party is actually cutting loss at about 6.8. If one party takes profit at 3 pips, the other is cutting loss at 4.8 pips.

One party relying on the other's price may then perform an arbitrage with a third party. If the second party refuses to be bound by the price which he himself has displayed worldwide and accepted by the first party, the first party will be suffering huge losses by relying on the second party's price.

When that company puts a rule there about anti-scalping how should one interpret it? There is something wrong about that rule or there is something wrong about that company.

 

[onurene]

True.. but thats probably because they arent offering every trade to the market. This rule is hihgly unappriciated for sure, at least from where i stand, for instance, when i break my position to half, close one and let the other run while putting stop near entrypoint. So if it doesnt reach the profit level and falls back i still can take the 0-3 pips. Now would be this considered as scalping?
Other than that i wonder does this 30% apply on monthly basis or what?

 

[Anonymous]

If I open an account with that company and place my first trade, and with my first trade I win 3 pips profit. Since that 3 pips profit comes from the first trade it is 100%, which exceeds 30% of the account total profit.

In that case every time I win they cancel my profit then I will be left with nothing for all my hard work.

 

[onurene]

Surely it isnt thinkable by trade basis. But if it happens once a month that also not very nice situation. For instance, at the first week ill scalp lets say 10 times with 10 lots, and continue on with 1 lot "normal" trades. Its hihgly possible that these scalps will be more than 30%, even more if you have bad streak with "normal" trades. So in my mind it would be better off on daily basis- well, even better with no such rule, for that matter.