Does LMFX Allow Scalping?( Here is the Answer)

Trading strategies are techniques used by forex or CFD traders to generate their trading signals. Most successful forex traders deploy at least one trading strategy that helps them determine which forex pair to trade, when to trade, whether to buy or sell, and when to close the trade.

Scalping is the trading strategy that aims to capture the small price movements of a forex pair or any financial market asset. The strategy is widely used in the forex market, stock market, cryptos, and various financial markets.

The trader switches to short timeframes like M1, M5, or M15 on the charts; he opens a trade when he spots a good opportunity and closes the trade after a few minutes. Excellent knowledge of technical analysis is required and the trader must be fast and disciplined.

LMFX overview:

Founded in the republic of North Macedonia in 2015, LMFX is a global broker that enables traders to speculate on the prices of more than 100 forex and CFDs. It is an ECN trader that offers raw spreads, low commissions, and very fast executions on the MT4 trading platform.

The broker organizes monthly demo contests and provides trading tools like economic calendar, trading calculators, and free VPS to its high-volume traders. The minimum trading capital is $50 and the max leverage is 1:1000.

Can you scalp with LMFX?

Yes! LMFX does not restrict any trader from using his strategies. Some brokers do not allow scalping, hedging, and the use of trading systems including trading robots. However, LMFX allows all these trading strategies because they are not market makers and have no dealing desk. So, both manual and automated scalping using Expert Advisors (EAs) are allowed.

Review scalping orders in LMFX

If you have learned how to open and close orders on the MT4, then you can as well scalp. The only difference is that scalping trades are short as the trader only targets a few pips gain. Follow the example below to place a scalping trade:

• Login to the LMFX MT4 trading platform.
• On the market watch, click and drag the EURUSD to the chart area to display its price chart.  
• Click on the M1 timeframe.
• From the menu bar, click insert>indicators> Oscillators> Relative Strength Index. The indicator displays below the chart.
• Watch the movement of the indicator; go long once the price drops to 30 and short-sell when the price reaches 70.

In case you are new, below is how to open a trade: 

• Just double-click the asset on the market watch or click the ‘new order’ button.
• Enter the trade parameters such as volume or lot size, stop loss price, take profit price and click “sell by market” or “buy by market” to place a sell or buy order respectively.
• Watch the ‘trade’ tab on the screen; the last column shows the profit.
• Close the trade if you have gained or lost a few pips; this should be in line with your trading plan.

Why do I like scalping on LMFX?

Below are the advantages of scalping with LMFX:

Scalping with LMFX gives me rest of mind. Some other strategies like swing trading or position trading involve holding positions for days or weeks; many traders barely get a night of good sleep when they have open positions. There is anxiety that the market may move steeply overnight resulting in huge losses, but scalping has no overnight positions and no pending contracts.

Scalping on LMFX is convenient as trade executions are very fast and precise without requotes. In scalping, every second matters, and LMFX provides the right speed and platform.

Expert scalpers depend on a combination of fundamental and fundamental analysis. They usually follow the news and avoid trading volatile markets. So, the analysis may be complex, but placing an actual scalping trade is easy enough for everyone including new traders. They can simply watch the price action on the charts, open positions, and close them within a few minutes.

I love scalping with LMFX because it is fun and easy but I also love the fact that swap fees do not apply to scalping trades. Rollover or swap fees apply when traders leave an open trade overnight. Scalpers do not pay this fee because trades are opened and closed within a short time.

Learn More: Does LMFX Accept US Clients?

Risk of scalping with LMFX

Scalpers usually trade with high leverage because they target only a few pips; so the few pips they gain must translate to a substantial amount; else they are likely to incur losses. But leverage is often referred to as “a two-edged sword” because it will also magnify losses if the trade reverses against the trader’s position.

Factors to consider while using a scalping Strategy

Trading psychology

Generally, emotions play a big role in forex trading. As a result, traders are advised to put aside their emotions when trading. This is difficult as nobody will sit comfortably and watch his hard-earned money go down the drain without making an effort to save the day.

Scalping is a fast-paced and high-risk trading strategy for disciplined traders. To succeed as a scalper, you must have a trading plan comprising many details including entry and exit rules. Emotions like anxiety, greed, and euphoria must be avoided completely.

Concentration

Many scalpers take time to study the charts before deciding to trade or not. Scalping requires in-depth knowledge of technical analysis and enhanced concentration. For example; trading the M1 timeframe requires paying attention to details and the ability to make quick decisions. Every second counts so, you cannot afford to lose focus.

Money Management

To become a successful scalper, you must have good exit strategies in order to manage risks and protect your trading capital. Otherwise, you can blow your account in a single trade. This is why scalpers plan every trading session.

The priority is usually to prevent losses as much as possible while the second is to make profits. Typically, most scalpers risk only 2% of their capital in a single trade. You may plan 10-15 trades in a session and set a profit target or a loss tolerance.

Let us consider an example: Steve is a scalper with a balance of $2,500. He decides to risk $50 per trade for about 10 trades. With a risk-reward ratio of 1:2 and high leverage; he targets at least 10 pips per trade and can bear to lose only 5 pips. He decides to trade 1 lot of EURUSD which amounts to $10 per pip and attracts a commission of $8 per round lot.

So, losing 5 pips will amount to $50; when you add commission, it becomes a loss of $58. But winning 10 pips will amount to $100 less $8; which is $92. With this setup, Steve needs to win at least 4 out of the 10 trades to remain profitable except he gains more than 10 pips on some of his winning trades. To achieve his aim, he has to set up his trades using stop loss, take profit and even limit orders.

In summary, a scalper must understand money management and plan his trades to succeed else, it becomes difficult to make profits.

Proper Trading Time Sense

Scalpers do not trade every day. Most forex scalpers prefer to trade when two forex trading locations are in session. For example, when the London and New York session overlaps; that is, from 1:00 pm GMT to 4:00 pm.

Furthermore, scalpers also follow social comments, political statements, and micro-economic releases like GDP, Nonfarm payrolls, CPI, Unemployment rates, etc which affect currency exchange rates. This is because they want to properly time their trades to avoid surprises that may lead to losses.

In order words, pro scalpers combine fundamental and technical analysis strategies to get the best results. 

Suitable Indicators for Scalping Strategy

Many strategies are used by scalpers depending on the trader’s knowledge, experience, and overall target. Below are some of the popular indicators used in scalping:

Stochastic indicator

This indicator comprises the %K line and the %D lines which show under the asset charts. %K is obtained from the lowest and highest closing prices within a defined period while the %D is the moving average of the %K at a default period of 3. Stochastic is an oscillator that is used to identify resistance and support levels.

On the charts, the %D is usually red while the %K is light; they display on a scale of 1-100. When the lines are above 80, it indicates an overbought asset and an impending bear market. When the lines are below 20; it means that it is oversold, so a price surge is expected.

Ichimoku cloud

This indicator is used to find the direction of a trend, measure momentum and also identify support and resistance areas. This indicator comprises 5 lines namely: Tenkan-sen, Kijun-sen, Senkou span A, Senkou span B, and Chikou span. Each line has its own formula and it is computed from the period of high and low prices.

An uptrend is confirmed when the Senkou span A is going up and goes above Senkou span B. The opposite is the case for a downtrend.

Relative Strength Index (RSI)

The RSI indicator measures how fast the recent price changes occur in an asset. It displays below the chart as a single line that ranges between 0 to 100. When the RSI is below 30, it indicates an oversold market condition while 70 indicates an overbought market condition.

Simple Moving Average

As the name implies, this indicator uses the moving average prices of the asset within a period to plot a line on the chart. It is used to determine if the prices will continue in a given direction or if it is about to reverse in the opposite direction.

It displays as a line graph on the charts. When the SMA line crosses above the price action of the asset, it indicates a bear market. But when it crosses below, it is a bullish market. Two SMAs of different periods can be applied to a chart to further analyze the chart using crossover strategies.

Final Verdict

Scalping is generally a high-risk strategy where the trader focuses on accumulating small profits from several short trades within a session. If properly planned and deployed, scalping can be a profitable strategy.

The strategy is easy to deploy, does not attract swap fees, and is rewarding. But, scalping at a professional level requires good risk management, excellent knowledge of technical analysis, proper timing, and enhanced concentration.

LMFX provides a fast network, high leverage, and trading platform suitable for scalping. The popular indicators used by scalpers are available on the LMFX MT4 trading platform. All scalpers are welcome to trade with LMFX.