It may surprise you that a large number of the MetaTrader 4 expert advisors being offered for sale are classified as a scalping expert advisor. That’s because scalping EAs have many attractive characteristics that appeal to the average Forex trader. That said, there are hidden dangers involved with trading a scalping EA that you may never have been informed of, so you owe it to yourself to get the full truth about these EAs before you invest your hard earned money into them. By the end of this article, you’ll know the hidden dangers of using a scalping expert advisor.
The Appeal Of A Scalping Expert Advisor
So why is using a scalping expert advisor so popular? Scalping means taking very small profits on each trade (between 5-10 pips normally) with a very wide stop (anywhere between 50-200 pips). Scalping EAs are designed to have very high winning percentages, which appeals to Forex traders because naturally as people we like to win, and we like to win a lot. When market conditions are favorable, a scalping expert advisor can put together 20 or even 30 winning trades in a row, and it’s these long winning streaks that Forex traders love to see.
Hidden Dangers Of Using A Scalping Expert Advisor
Unfortunately, every rose has its thorns, but the dangers of using a scalping expert advisor are seldom made clear by the vendors who are selling them. One of the major downfalls of a scalping EA is that it has the risk of losing days or even weeks of profit in unfavorable market conditions. That’s because it has a very wide stop that is far, far bigger than the profits it takes. Another risky element with scalping is that it’s in the market very frequently, and as a result there’s a very real risk of it encountering a sudden unexpected market move like one that was caused by the Japanese 8.9 Earthquake recently.
Even though a scalping expert advisor may be profitable in the long run, many Forex traders will abandon it when it goes through a losing streak because they can’t stomach the drawdowns. If you’re considering using a scalping EA, you need to be aware that there’s a very real risk of you going through a losing period right at the start of trading with it. If that happens, your account may never recover even with the influx of profits coming in later on. Personally, I don’t like the risk profile of scalping EAs, and that’s why I don’t use them to trade.