The "opening" spread vs The "closing" spread - page 3
You are missing trading opportunities:
- Free trading apps
- Over 8,000 signals for copying
- Economic news for exploring financial markets
Registration
Log in
You agree to website policy and terms of use
If you do not have an account, please register
No. Whatever how the chart is built, the mechanism you described in your previous post is always right. Using mid prices, bid prices or any other price to show on the chart, is totally independent of how the spread take part to a trade.
People using a "mid price" platform think the bid is midprice-1/2 spread and ask is midprice+1/2 spread (and so it's "paid" half at the open, half at he close) because they don't understand that this midprice is only an abstraction.
People using a "bid price" platform, like MT4 and MT5, think the ask price is bid price+spread, as if the spread was something existing by itself. It's not, the spread is the difference between the 2 real prices which are bid and ask. All of this is obscured by things like fixed spread offered by some market maker brokers or other spread manipulations. But we are talking here about the essence of a Forex market. The bid price is the best price offered by buyers at which you can sell, the ask price is the best price offered by sellers at which you can buy. That's the only 2 realities on a Forex market.
Beside that, using the word "pay" as in "the spread is paid at open" (or at close or in the middle of a trade, doesn't matter here) is misleading and confusing. The spread is not something paid in the usual sense, as I explained above it's the difference between bid and ask price and it influences directly your trade (It's completely different from paying a commission for example). Let's take a buy open at 1.1002 (ask), bid price is 1.1000 at that time, so the spread is 2 pips. You want to realize 5 pips profit so close at 1.1007, the price has to move 7 pips. Now, imagine the same trade but on an other broker you buy at 1.1002 (ask) but the bid price is 1.1001 for a spread of 1 pip. You still want to realize 5 pips profit, so close at 1.1007. The price has to move only by 6 pips this time. It's not that you "pay" 1 pip instead of 2 pips, it changes your trade because in the first case if the market moves only for 6 pips your trade will not reached 1.1007 and could eventually never reached it.
You are totally right saying the spread is taken into account at the opening, once a buy trade is open the only price which matters is the bid price because when you will want to close your trade you will need to sell, find a buyer and so the best bid price. Once a sell trade is open the only price which matters is the ask price because when you will want to close your trade you will need to buy, find a seller and so the best ask price.
Thanks to everyone.
I think what confuses me the most was that MetaTrader platform charts are all bid prices by default (chart, excel, bars) not the "mid" price. So the operation/deduction/mechanics of spread on the platform confuses me a lot.
Another thing you said that bid and ask are the only 2 realities in FX. I always think that there is a "mid" price but now I think about it, it is only an abstract perception when we want to get the underlying "market" price. I was always confuse back then when I see prices with 0.1 spread it means that there would be a 6th decimal place if i want to get the market price.
BUt everything is all clear to me now. Thanks
the underlying "market" price
There isn't an underlying market price. There are two prices: what people are prepared to sell at, and what they're prepared to buy at. There isn't a central price to which someone is adding spread on each side. That's not how it works.
There isn't an underlying market price. There are two prices: what people are prepared to sell at, and what they're prepared to buy at. There isn't a central price to which someone is adding spread on each side. That's not how it works.
Yes. As I pointed it out, i think at first that there exist a "mid" price. But Alain, clearly explained it.
I think my reply mislead others that Im still confuse. Those are rather my perspective at first, but its now clear.
Thanks to everyone.