Does that scalping EA really bring profits?
Scalping EA (Expert Advisor) trades frequently, so it has the potential to be highly profitable.
For example, take a look at the performance of the EA sold under the name Forex Robotron below.
Looking at the trade history, positions are closed in 3 pips to 5 pips, and most trades take less than 1 hour. This is a typical scalping EA.
You might want to buy this EA because it has great results.
However, you will not get any profit by purchasing this EA.
When determining whether the scalping EA will bring profits, you must always check “whether the forward test has been performed on a real account with a reliable broker.”
If you do not check this, you risk purchasing a fraudulent EA.
In this article, we will explain in detail the appeal of scalping EA and its problems.
Scalping trading and problems
Scalping is a trading strategy that targets very small price fluctuations. Frequently opening and closing positions over short periods of time (often within seconds or minutes).
If the target pips width is less than 10 pips, it can be called a scalping trade.
One of the big advantages of scalping is that it allows traders to generate profits quickly. Also, because trades are executed over a short period of time, exposure to market risk is minimized.
Due to the high liquidity of the foreign exchange market, traders have plenty of opportunities for scalping trades.
Scalping can be the most profitable trading strategy due to the high frequency of trading.
However, performing scalping trades manually comes with a series of problems as follows.
- Traders must constantly monitor the market and make quick decisions.
Therefore, traders adopting this strategy require a very high degree of discipline and concentration. - This trading strategy is mentally and emotionally taxing because speed is important. Requires a high level of concentration and ability to cope with stress.
- Traders need the ability to analyze price movements effectively.
EA (Expert Advisor) solves all these problems.It executes trades completely automatically on the MT4/MT5 platform.
Once a trader sets up a the EA on MT4 or MT5, there is nothing left to do.
Since scalping is a profitable trading method, many scalping EAs are on sale.
However, when purchasing and using the EA, you need to fully understand its benefits, weaknesses, and risks.
The following describes the characteristics of scalping EA in detail.
Advantages of scalping EA
Quick profits
Scalping trade uses very small price fluctuations to make quick profits.
Trades are executed frequently and profits can be accumulated quickly.
Scalping EA executes trades in a very short time. This allows simultaneous trading on multiple currency pairs.
For example, in the case of a swing trading EA that holds positions for several days, a large amount of margin is required to trade two currency pairs at the same time.
This is because the position occupies margin for a long period of time.
Holding multiple positions for a long period of time is risky.
On the other hand, scalping EAs trade in a short period of time and target a very small pips range, so the risk per trade can be reduced.
This allows you to trade in multiple currencies simultaneously.
Traders can build portfolios of multiple currency pairs to diversify their risk. This helps reduce the impact of potential losses.
24/7 trading
EA work automatically and can execute trades 24 hours a day, even when the trader is not monitoring the market. Automated EA never misses potential trading opportunities.
Fast trade execution
Scalping trading requires very quick trading terminal operating skills. This requires training and high skill.
By using an EA, trades are executed completely automatically, so there is no need for the training or skills required for manual trading.
Reducing emotional factors
One of the main advantages of using a scalping EA is that it reduces the emotional factor when trading. Emotions such as fear and greed often lead to poor decision making.
Traders need to be disciplined.
However, it is human nature to not accept losses and be unable to close positions.
Speed is particularly important in scalping, so it is necessary to fully comply with the trading rules and execute take profits and stop losses without hesitation.
Utilizing an EA allows traders to eliminate emotional factors and rely on the system’s predefined rules and algorithms.
High probability trades
Scalping EA executes a huge number of trades. Therefore, the number of transactions executed in the test is also huge.
The greater the number of transactions, the more reliable the test.
For example, if you have 7 winning trades out of 10 trades, your winning rate is 70%.
However, in this case, the number of trades is not enough, so the win rate of 70% is not very reliable.
On the other hand, if out of 10,000 trades there are 7,000 winning trades, the winning rate is 70%.
In this case, the winning rate of 70% is highly reliable since the number of trades is very large.
This is because the more times a trade is executed, the closer it gets to the strategy’s original probability.
For EAs that hold positions for a long time, there are cases where the number of trades is not sufficient during the testing stage.
On the other hand, scalping EAs often perform a large number of trades during the testing stage, so It is likely to be superior as a trading strategy.
Weaknesses of scalping EA
Although scalping EAs have some advantages, there are also some weaknesses that traders should be aware of.
In particular, the environment in which the EA is run makes a big difference in the results.
High transaction costs
Spreads and commissions, which are transaction costs, are incurred every time you execute a trade. Scalping requires frequent trading, which increases trading costs. These costs can erode the profits generated by a scalping EA.
Must use a broker with low trading costs
Since scalping EAs aim to make small profits on each trade, trading costs such as spreads and commissions can have a large impact on overall profitability.
When using a scalping EA, you need to use a good broker with tight spreads and low commissions.
Fast execution speed is required
Scalping requires fast execution to target small price movements. The effectiveness of the scalping EA depends on the speed and reliability of the trading platform and internet connection.
Therefore, it is necessary to trade at a geographically close distance to the trading server of the broker you are using.
For example, if the broker’s servers are located in New York, it would be ideal to trade there. However, changing one’s place of residence is not an easy task.
Therefore, it is necessary to contract for a VPS that has a server located geographically close to the broker’s trading server.
Deep liquidity and execution ability of the broker is essential
Trading with a broker that does not provide sufficient market liquidity will result in high slippage.
Slippage is actually the difference between the order price and the execution price.
Slippage can work either for the better or for the worse.
Since the scalping EA targets a very small pips width, the results of your trades may vary depending on the slippage that occurs with each broker.
Even if the slippage that occurs on each trade is small, it can make a big difference in the end if the number of trades is large.
Broker may limit scalping
Some brokers restrict scalping trading. This is because high-frequency trading puts a load on the broker’s trading server.
A broker may have restrictions such as a minimum trading period or a maximum number of trades per day.
Traders using scalping EAs must ensure that their broker allows scalping.
Judgment criteria for using scalping EA
Considering the above-mentioned problems with scalping EA, please be careful of the following points when purchasing or using scalping EA.
Have the forward test results been made public?
The results of scalping EA are greatly affected by execution speed, slippage, etc.
You cannot judge whether a scalping EA is good or bad just by the backtest results.
It is necessary to make a judgment based on the results of forward tests.
Has a forward test on a real account been published?
Demo accounts and real accounts have different environments.
In particular, scalping trade is sensitive to the operating environment, so the results between demo and real will differ.
Even with the same broker and the same account type, the results will differ between demo and real.
Even if the scalping EA has good results in the forward test of a demo account, it does not necessarily mean that it will give the same results in a real account.
One of the famous scalping EAs on sale is “WallStreet ASIA” by “WallStreet Forex Robot”.
“WallStreet ASIA” is making profits on the demo account, but the results on the real account are not published. Perhaps that’s why you can’t get good results with a real account.
When judging the performance of a scalping EA, it is necessary to check the results in a real account.
Has the trade been tested with large lot sizes?
The results of scalping EA depend on execution.
The larger the lot size, the more problems there will be in execution.
Even if you can make a profit with a small lot size, you may not make a profit with a large lot size.
The criteria for evaluating a scalping EA is whether it produces good results in a real account with a large lot size.
Is the ratio of take profit and stop loss appropriate?
In scalping EA, the stop loss may be very large compared to the take profit value.
For example, take profit is set at 5 pips and stop loss is set at 50 pips.
If the take profit is small and the stop loss is set large, the winning rate will increase. This helps bring about good results in the short term.
However, in such a trade, one loss will wipe out all the profits you have accumulated so far.
GPS FOREX ROBOT, which attracts traders, is this type of EA.
This EA performs trading by combining scalping EA and martingale EA. Although it looks like the results are very good, such an EA will wipe out your account balance with one loss.
Conclusion about scalping EA
Scalping is the most rational trading method that executes high-probability trades at high frequency.
Executing scalping with manual trading is difficult, but
Trading can be fully automated on MT4 or MT5 using an EA (Expert Advisor).
Scalping EA has the advantage of being able to accumulate profits quickly.
On the other hand, it has the weakness of being sensitive to operating environments such as brokers and account types.
If you are considering purchasing a scalping EA, be sure to check “Is the forward test performed on a real account with a reliable broker?”
Backtesting and forward testing on demo accounts are completely unreliable for scalping EAs.
You should be careful when purchasing and using EAs that do not meet these conditions.
Forex broker recommended for scalping EA
As explained, whether scalping trades are profitable or not depends largely on the trading environment.
You should run it with a reliable broker that has low trading costs and offers good execution.
The Zero account from HF Market (HFM), a globally reliable broker, meets these conditions.
They offer the best trading environment, including a minimum spread of 0.0 pips, trading fees of 6 USD for 1 lot round trip, swap free, 1:2000 leverage, and a 20% deposit bonus.