Scalper Expert Advisor : Caution!

Using a scalper expert advisor can be a very profitable way to trade the currency markets but it also carries a good deal of risk. Some people seem to make a lot of money this way while others lose their shirts. So what makes the difference and how can you stack the odds in your favour when you are using a scalper expert advisor?

1. Choose your broker carefully

It is important to get the right broker when you are using a scalper expert advisor. Many brokers do not like scalping strategies and particularly object to the fast profits that can be made with an EA.

Normally these brokers will be market makers who will carry the risk of a trade themselves until they can match it in the ECN. If the EA moves in and out of the market very fast, they do not have a chance to cover their risk, and so you profit will be their loss. As you can imagine, if you are very successful they will soon decide that they do not want your business.

Brokers who have a place in the ECN and do not have to rely on a third party are more likely to be happy to accept your robot's scalping strategies. To find an amenable broker either ask the developers of your EA or look for recommendations from other scalping traders in forex forums.

2. Manage your risk

Many people new to forex trading assume that because scalping strategies rely on many small trades, they are less risky than systems relying on a higher profit per trade. This is not true at all. Scalping is just as risky as any other form of forex trading. Risk management is essential if you do not want to be wiped out of the game.

For the same reason it is important not to overstretch in terms of leverage. Certainly, do not choose a broker by looking for the one that gives you the highest leverage, unless you are very sure of the drawdown of your system and that you can cover it.

The problem with a high leverage means that triggering a stop loss will mean a greater loss. Sure, the profits are higher too, but when you go through a bad patch you can run through your funds very quickly. It is important that your account can take the battering. It is much more likely to be able to do that if you have kept your risk and your leverage low.

3. Understand your EA

It is also important to understand what your scalper expert advisor is doing. This means having realistic expectations about things like the number of times it will trade in a week, how much on average it will make on a successful trade, how much it will lose on an unsuccessful trade, what percentage of trades are successful, etc.

All of this helps you to know what you can expect in terms of your bottom line in the long term and what will be the optimum level of risk. When it comes to risk, by the way, always assume that the worst case scenario is at least twice as bad as the worst patch that you have seen.

You cannot rely on information from the developers or from other users in this respect. This is not a matter of trust, it is just that different variables will apply to each individual. So do your own back testing and demo testing before you start to use a scalper expert advisor live.