Floating spread or fixed spread ? - page 3

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gbemi1:
Spread is the brokers fee. and it is the gap between ask and bid, so it is deducted when you open an order. (For example: if you broker is 3pip fixed and You place a buy order at 1.0356 you won't start profiting from your order until the trend reach 1.0360. so the spreads "your Broker fees for trading through their company" is deducted from your account immediately, not when you close trade. You will notice that t times your trade always start from loss. That is because of spreads they deducted immediately you place an order.)

Ok it's more clear. I think you are right but partially only. You are right for a Buy, but if you open a Sell, you are wrong. I made a little table to illustrate this (used price in bold):

Spread example

I use 4 digits for simplification and I always start from a bid price and I suppose a price action reflected on bid price of 4 pips (1 pip = 0.0001).

We can see that gbemi1 is right when he take a Buy, he buy at Ask price which is 3 pips higher than Bid. But if he take a sell, his price is Bid and the spread is fixed in the Ask price when he close.

Are you agree ? Who is right is not important, we try to obtain a solid understanding of what spread is and how it influence our trading.

 
gbemi1:

I disagree with you.

I agree with RaptorUK:

I think what happens to the above chat has nothing to do with ask or bid. I have two fixed spreads broker but at times one may be at 1.0346 and other at 1.0342.

I will return to this discussion with RaptorUk later, let's go step by step in clarifying first disagreement with gbemi1.
 
gbemi1:
Spread is the brokers fee. and it is the gap between ask and bid, so it is deducted when you open an order. (For example: if you broker is 3pip fixed and You place a buy order at 1.0356 you won't start profiting from your order until the trend reach 1.0360. so the spreads "your Broker fees for trading through their company" is deducted from your account immediately, not when you close trade. You will notice that t times your trade always start from loss. That is because of spreads they deducted immediately you place an order.)
What price do you Sell at ?  you Buy at Ask but what price do you Sell at ?
 
angevoyageur:
I will return to this discussion with RaptorUk later, let's go step by step in clarifying first disagreement with gbemi1.
:-) 
 
RaptorUK:
What price do you Sell at ?  you Buy at Ask but what price do you Sell at ?
So also if you open sell at 1.0356 the spread will be deducted immediately and you won't start profiting from your trade immediately. If your broker spreads is 3pips and you open buy order  when the trend is at 1.0356, you won't start profiting until trend reach 1.0352. That is how it's works from my broker. I don't know yours
Documentation on MQL5: Standard Constants, Enumerations and Structures / Trade Constants / Trade Orders in DOM
Documentation on MQL5: Standard Constants, Enumerations and Structures / Trade Constants / Trade Orders in DOM
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Standard Constants, Enumerations and Structures / Trade Constants / Trade Orders in DOM - Documentation on MQL5
 
Symbol     
Bid Ask Spread  
EURUSD 1.30001    
1.30010  0.9  
GBPUSD 1.49224 1.49253  2.9  
USDCHF 0.95146 0.95173  2.7  
USDJPY 95.937 95.948  1.1  
USDCAD 1.02862 1.02873  1.1  
AUDUSD 1.02354 1.02363  0.9  
NZDUSD 0.82101 0.82125  2.4  
EURGBP 0.87097 0.87122  2.5  
EURJPY 124.720 124.740  2.0  
EURCHF 1.23695 1.23724 
2.9  
GBPJPY 143.175 143.208 3.3  
GBPCHF 1.41989 1.42042 5.3 
RoboForex - 24x5 Online Forex Trading | Currency Trading Broker
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Forex is an international off-exchange market with a daily turnover of more than 3 trillion dollars. The name “Forex” comes from the phrase “FOReignEXchange”, meaning an international currency exchange. The major participants of this market are the world’s largest banks, which buy and sell different currencies, raw materials, gold, oil. All...
 
gbemi1:
So also if you open sell at 1.0356 the spread will be deducted immediately and you won't start profiting from your trade immediately. If your broker spreads is 3pips and you open buy order  when the trend is at 1.0356, you won't start profiting until trend reach 1.0352. That is how it's works from my broker. I don't know yours
The spread is not deducted,  what you are shown is the loss if you were to close the trade immediately,  so when you Sell at Bid your are then shown your loss if you were to immediately close your Sell with a Buy at Ask. The loss isn't realised as you haven't closed your trade,  if your Broker were to reduce the spread to 0 and Bid was at the same level as when you placed your trade you could exit without any loss.
 
gbemi1:
So also if you open sell at 1.0356 the spread will be deducted immediately and you won't start profiting from your trade immediately. If your broker spreads is 3pips and you open buy order  when the trend is at 1.0356, you won't start profiting until trend reach 1.0352. That is how it's works from my broker. I don't know yours

You misunderstand how your broker work. All brokers works the same to my knowledge :

  • If you take a Buy, Ask price is used as open price, and Bid price is used as close price (close is actually a sell in this case). You see immediately a loss when you start a trade because profit/loss (P/L) is calculated by the difference between open price and the price IF you close your trade, so close price. In this case this give P/L(Buy) = close price - open price => P/L = Bid - Ask.
  • For as Sell, Bid price is used as open price and Ask price is used. P/L(Sell) = open price - close price => P/L = Bid - Ask. So here also you see a loss from start IF you close the trade.

Spread is difference between Bid and Ask, but which Bid and which Ask ? Spread is between price at open time and price at close time. For a buy, Spread = Ask at open time - Bid at close time. For a sell Spread = Bid at open time - Ask at close time. Spread is ALWAYS "deducted" by broker when you CLOSE a trade not when you open a trade. 

Our chart show Bid price, so for simplification, as RaptorUk say (another discussion ;-)), we perceive that price action is reflected in Bid price only, and spread in Ask price only. In this case, we can say that spread is fixed at open for a buy (that is why I write in a previous post that your are partially right) and that spread is fixed at close for a sell.

Obviously, all of this make more sense with a floating spread. If we have a fixed spread, we don't perceive a difference between open and close spread, so we can say that spread is always deducted immediately when you open a trade, but it's an illusion.

 
RaptorUK:
The spread is not deducted,  what you are shown is the loss if you were to close the trade immediately,  so when you Sell at Bid your are then shown your loss if you were to immediately close your Sell with a Buy at Ask. The loss isn't realised as you haven't closed your trade,  if your Broker were to reduce the spread to 0 and Bid was at the same level as when you placed your trade you could exit without any loss.
Wauuw. It took me 30 minutes longer than you to reply ;-)
 

I agree with all of you. I believe i'm still learning.

Thanks very much

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