The goal of a Forex scalper is to buy or short a pair of currency at the bid or ask price and then sell quickly when the trade is in profit by a few pips. Using this trading strategy of taking a few pips out of the Forex market at a time, can easily compound into large gains as long as a strict exit strategy is used to prevent losing trades absorbing all profits.

Generally Forex scalpers use the 1 min, 5 min and hourly charts to find trades that can make them a small profit. As the Forex scalper is only interested in making a few pips per trade it is essential to use a broker with low spreads and instant execution of trades.

A few things that can improve your chances of being successful as a Forex scalper are:

- Make sure you know when news relevant to your currency pair is coming out.
- Write down the previous days Open, High, Low and Close.
- Learn some basic candlestick patterns so you can identify them when they occur.
- Draw in major trendlines and pivot points on the daily and hourly charts of your currency.
- Determine the major direction for the day, Bullish or Bearish, trading in the longer term direction will gives trades more chance of being successful.
- Adjust your stop when you are 10 pips in profit.
- If the trade is taking to long to go in your direction or you don’t feel comfortable with it, get out.

One advantage of Forex scalping is that the small targets of 5-15 pips are easier to achieve. One of the frustrations Forex traders have is when the trend reverses during a trade, because Forex scalper’s get in and out of the market quickly this is less likely to happen. Many people have been successful with Forex scalping, so there is proof that it can be a profitable Forex trading method. A disadvantage is that the risk to reward ratio can be very low. As the profit per trade is so low, one bad trade can wipe out all the profits for a day. This means it is especially important to set and move a stop loss.

There are a couple of traps that new Forex traders fall into when they begin Forex scalping. They may become addicted to making random profits, especially if they are immediately successful. This can lead to the trader taking more risky trades and not sticking to their plan. A second trap is trying to make up for the losses of yesterday. New traders often think about how they can win back the money they lost a previous day, this tends to cloud their judgment and can lead to emotional trades that are doomed for failure.

In Part I
1- Account Type Available
2- Spreads / Commissions / Fees
3- Margin / Leverage
4- Execution
In Part II
5- Rollover Policy
6- Trading Platform
7- Reputation
8- Support

Account Types Available.

First of all, if you are new to Forex or if you intend to trade with a small amount of capital, I highly suggest that you start by looking at brokers who offer mini accounts. With a mini account, you have pretty much all the same advantages as a full account but can trade lots which are 10 times smaller. Very few brokers offer the possibility to trade an even smaller amount than a mini account, all the way down to units of $1. A mini account will give you the opportunity to sharpen your skills while limiting your risk. If you are just starting in Forex, I suggest that you look for a broker that also offers a demo account for a period of at least 30 days. This way you can learn the basics without any risk. Here are some questions to ask or look for:

1- Can you open a demo account?
2- Can you trade mini lots?
3- Can you easily change to a standard account if desired in the future?
4- What is the minimum deposit and account balance?

Spreads / Commissions / Fees

Most Forex brokers don’t charge commissions (always make sure), but will charge what is called a spread. In currency trading, the smallest possible movement in either direction is called a pip. Forex brokers will therefore add a few extra pips on the buy side of any transaction as their commission. This will have an important impact on your return, because obviously you need to have the market go in your predicted direction by the spread amount just to break even. Before I get into more detail about the spread, make sure you also look at the other fees or commission that the Broker might be charging. For example, do they charge any fees for deposit and/or withdrawal? Do they charge a fees for their online trading platform or for placing a trade by phone? Any other fees?

Most brokers will have a fixed spread which will be posted on a page of their website. A fixed spread will guarantee you the same commission in any market condition, at any time of day or night. Some Forex broker might offer variable spread which will be most likely lower than fixed spread under normal market condition but things heat up and the market become more volatile (usually when important economic news are release) the spread will become wider. I personally prefer the fixed spread as I will sometime have to enter or exit a trade in a busier period, and don’t want to get caught with higher spread which will turn my trade into a less favorable one. But depending on your strategy, variable could be better for you.

The spread will be different depending on which currency you want to trade, so it’s important to look at the one you intend on trading the most to start with but obviously also plan ahead. Make sure you verify if their spread is different depending if you choose a mini account or a normal account as they might also be different.
Obviously, spread is important and will directly affect your profit potential. However be aware that some Forex Brokers will offer low spread knowing that most traders will look for this first and foremost and won’t notice other trading condition which might be less advantageous and end up costing you more at the end as well.
Here are some questions to look ask or look for concerning the spread:
1- Is there any other commissions or fees apart from the spread?
2- Are the spread Fix or Variable?
3- Are the spread for Mini and Normal account the same?
4- What are the spread on the currency pairs I wish to trade?

Margin / Leverage

Because moves in the Forex market are counted in pips, and that 1 pip is generally the equivalent of 1/100th of a cent, leverage is essential to make any profits. Therefore you’ll find that margin of 100:1 will be commonly offered. This means that you can invest by borrowing up to 100 times more than you account balance. But obviously with leverage you will also be exposed to more risk. Actually, one of the most common reasons for beginners to fail in this market is losing their starting account by taking too much at once. So a higher leverage isn’t necessarily better and not really required. Most brokers should offer an amount of leverage sufficient for your needs. The most important thing here will be to make sure you check their margin requirement (different margin on the weekend), how their margin call work, if it’s different depending on the account type or currency traded.

Here are some questions to look ask or look for concerning the spread:
1- What leverage do they offer?
2- Is the margin the same for any account type?
3- What is the margin requirement?
4- How is it calculated?
5- Does it change depending on the currency pairs traded?
6- Is it the same at any time of the day or on week-end?

Execution

One of the most important thing to consider for successful trading is the how fast and accurate your orders will be executed by your Forex broker. Especially in time of higher volatility, will you get your desired price with minimum slippage? Under volatile condition, some broker will re-quote you with a new price which you’ll have to accept or decline (but then price might have moved again), some will just reject your order (you’ll have to do another one) and others will just execute your order at the new current price. Considering that many times per month, especially during major news release, a currency pair can fluctuate as much as 100 pips in a matter of practically seconds, this could lead to a disastrous result for your trade. I can’t stress enough about the importance of this. Yes, some places might offer better spread, but in reality, because of slippage or slow execution, you might end up paying way more than you expected.
Here are some questions to look ask or look for concerning the spread:
1- How fast will the order be executed?
2- Is there any execution guarantees for Limit and Stop orders?
3- What type of execution can you expect under volatile conditions?

Part II to follow this week…

However, the company forecast a 34 per cent decline in net earnings this fiscal, as a result of the impact of the appreciation of the yen and costs on account of launching its next generation stand-alone game console, ‘Wii.’

The company said it had net profit of 98.4 billion yen, which is up from 87.4 billion yen in the previous year. Its revenue for the year fell 1.2 per cent to 509.2 billion yen. It had booked foreign exchange gains of 45.5 billion yen, based on an exchange rate of 113.1 yen to a dollar and 137.86 yen to a euro in the year under review. In the previous year, the company had foreign exchange gains of 21.8 billion yen.

At end-March 2006, the company had dollar-based assets valued at $2.9 billion and euro-denominated assets of 807 million euro.

While the company’s bottom line has improved, it said its operating profit has fallen 19 per cent to 90.3 billion yen as a result of declining global sales of its Gameboy family of portable games and Gamecube consoles. The global shipments of Gameboy Advance SP and Gameboy Micro over the year fell to 8.33 million units from 15.4 million units the year earlier, while global sales of game software for these consoles came down to 59.36 million copies from 84.57 million copies.

Similarly, shipments of Gamecube stand-alone consoles fell to 2.35 million units from 3.92 million units earlier and sales of game software for the systems coming down to 32.79 million copies from 48.42 million copies.

The company’s Nintendo DS consoles sold 11.46 million units, almost doubling the 5.27 million units recorded in the previous year.

Nintendo is coming out with its “Wii” game console later this year. The console is expected to help the company regain some of the market share it had lost to rivals like Sony Computer Entertainment Inc. and Microsoft Corp. It is aiming to sell 6 million Wii units in the year to March 2007.

The company intends to increase capital investment to 7 billion yen this year from 5.6 billion in the previous year.

Nintendo is paying 390 yen per share as dividend for the year against 270 yen per share paid last year.

Nintendo stock was down 8.3 per cent at 17,410 yen.

SOURCE: Earthtimes

JON’S COMMENT
Well, Nintendo certainly had a nice run profiting from the strengh of the Yen and it’s kind of funny to see that they have made more money this way in the past year. Maybe next year, they’ll be more lucky with their new system “Wii”. But it goes to shows that every business that imports or exports goods should have some edging plans to protect their bottom line and assets.