The "opening" spread vs The "closing" spread

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Randy
101
Randy  

Hi. I'm sort of new to forex. I have a question.

Let's say I open a position; any position.
There's an initial spread cost (ex. a spread of 3).
Next, let's say I'm at a profit of +0.12; and now I decided I want to close my position.

Here's my question.
Will my profit be +0.12 - the opening spread or the closing spread?


Note: Opening spread meaning the spread during the time I opened the position.
Closing spread meaning the spread during the time I want to close the position.

Note: The opening spread is not always the same as the closing spread.

Erman Ardianto
1145
Erman Ardianto  
+0.12 is your profit, not an opening or a closing spread. Spread only be charged once when you enter the market.
When you close at $0.12, then you'll have additional $0.12 in your account.
Randy
101
Randy  
devilian1899:
+0.12 is your profit, not an opening or a closing spread. Spread only be charged once when you enter the market.
When you close at $0.12, then you'll have additional $0.12 in your account.


"... Spread only be charged once when you enter the market ..."

That answers my question. Thanx.

zap
182
zap  
r2b2lynn:
devilian1899:
+0.12 is your profit, not an opening or a closing spread. Spread only be charged once when you enter the market.
When you close at $0.12, then you'll have additional $0.12 in your account.


"... Spread only be charged once when you enter the market ..."

That answers my question. Thanx.

This is not true this way.
You open a buy on Actual Ask, you close it on Actual Bid.
You open a sell on Actual Bid, you close it on Actual Ask.

That is, you kind of loose the bigger spread of the two (I mean opening or closing), since not the Actual Spread that counts, it is the Actual Bid/Ask that count. How far is the counterpart does not matter at the time of opening/closing.

Shown profit is always net profit, that is the profit you would get if you closed the position at that very moment. (You start with 0 - actual spread, when opening a position.)
Randy
101
Randy  
Zap:
r2b2lynn:
devilian1899:
+0.12 is your profit, not an opening or a closing spread. Spread only be charged once when you enter the market.
When you close at $0.12, then you'll have additional $0.12 in your account.


"... Spread only be charged once when you enter the market ..."

That answers my question. Thanx.

This is not true this way.
You open a buy on Actual Ask, you close it on Actual Bid.
You open a sell on Actual Bid, you close it on Actual Ask.

That is, you kind of loose the bigger spread of the two (I mean opening or closing), since not the Actual Spread that counts, it is the Actual Bid/Ask that count. How far is the counterpart does not matter at the time of opening/closing.

Shown profit is always net profit, that is the profit you would get if you closed the position at that very moment. (You start with 0 - actual spread, when opening a position.)


So Zap (or anyone), I guess my question is, am I only charged the spread when I enter the market?

Or am I charged both when I enter, AND/OR when I exit?

Ray
2646
Ray  

The price on the chart is indicative of the current BID pirce.

You are "charged" spead when you buy.

You see a price you like on a chart, and pay price+spread (this is ASK).

You are not "charged" spread when you sell.

You see a price you like and sell. You sell at the price you see on the chart.

----------

Now, having said that:

When you buy, you are not joining other buyers, you are paying "asking" price.

When you sell, you are not joining other sellers, you are selling for what is being "offered".

So you are at some disadvantage 2 times.

----------

Example A:

A currency has a Bid af 1.2000 and an ask of 1.2005 (5 pip spread)

You hop on MetaTrader, ready to make some money. You see 1.2000 on the chart and buy.

You Buy at 1.2005

Moments later you fear the world will suddenly end. Price on the chart has not moved. You sell at 1.2000

Your net loss is 5 pips.

----

Example B:

You are an astute trader using an ECN Broker with no restrictions on trade placement.

You see Bid is 1.2000 and you join the others with offers to buy at 1.2000

A market order is executed by someone less astute, and your offier is taken

You are now long at 1.2000

You decide to scalp the "spread", the Bid is still at 1.2000 and Ask is at 1.2005

You place an order to sell at 1.2005, joining other sellers

Someone executes a market order to buy, and they pay your asking price, 1.2005

You are now flat, and have a profit of 5 pips.

---

One method you are -5, the other method you are +5 (the difference is 10, or twice spread).

---

Still confused?

Randy
101
Randy  

Thanx for the response phy. That also helped.

But I think I can figure out the rest tomorrow.

Erman Ardianto
1145
Erman Ardianto  
The difference between Bid and Ask is spread. You buy on Ask but will exit on Bid, and sell on Bid but will exit on Ask. You'll always start with minus spread when entering the market.
zap
182
zap  

That is, you kind of loose the bigger spread of the two (I mean opening or closing), since not the Actual Spread that counts, it is the Actual Bid/Ask that count.

Let's see this on another theoretical scenario, with an MT4 broker, not ECN one.

Bid: 1.2000
Ask: 1.2005

You BUY at 1.2005. You could sell this opened buy at 1.2000, so you are in -5 profit. This is clear so far from what phy said.
Now let's assume, "price" doesn't change, only spread widens as a herald of volatility. This can mean two things: Higher bid, or lower ask (or both) than normal (see, there is no real price at Forex)

Bid : 1.1998
Ask: 2.0007

You want to close your Buy (opened at 1.2005), you can do it at 1.9998. So you sort of pay the bigger spread too. (If only changing bid had widened the spread, you would have paid the bigger spread)

So do not take actual spread for granted, the only thing really counts is at what bid/ask you can/could open/close your position.
.
59
.  
How to write code the open price spread....script...to csv....???
Mpendulo Chiliza
431
Mpendulo Chiliza  
use the OrderCommission() function after OrderSelect()
123
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