Spread, Comissions, Slippage (SCS Trio)
Some brokers are just like snakes ? Ha..ha....all coming from charts ..time..(when start and close the trading), they can take some profits from traders.
What is the rough spread+slippage of a normal broker?
I'm planning to get into forex and have been doing some backtracking and calculations.
I see that the current spreads for GBPUSD and EURUSD are 3pips and 2pips, respectively.
What is a good a rough average of the slippage that occurs? How wildly does slippage and spread fluctuate depending on the market situation? What's the worst case scenario? Is there a data table out there that lists average slippage and spread fluctuation by week or month?
Give me answers in numbers if you can please. Thanks.
Trade during the FOMC and you can get slippage of 100+ pips.
Rough is a relative term.
If you're using EAs, it's possible to implement a max spread as well as a max slippage above which no trade will be taken. This can be very handy.
Happy trading,
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The SCS Trio, spreads, comissions, and slippage is a very important factor in day trading forex success.
Forex is a very difficult market, and in order to beat that market, or to make consistent profit, you need to overcome several factors. The SCS Trio constitute a large part of the edge that works against any trader. Let us discuss each element of this Trio to see how it works against us and how to overcome its effect.
Spreads: Spreads are the cost of entering a trade. Although this is inevitable in spot forex, yet it is amount, which is varibale from broker to broker, can help us make more profits.
Consider you have a system which had the following stats: Total Pips per month:+30. Total Positions taken:66, etc...
Looking at the stats above, had the broker above given youa better spread for the 66 positions you took and closed in that month, say less 1 pip only, you would have saved a 66 pip. Thus your overall results would have been +99 instead of +30. Sometimes, a loss balance at end of month can be turned into a breakeven or a profit by saving pips on spread.
Comissions: The same applies on comissions. One friend of mine in 2000, opened a trading account with a company who used to charge 50USD for a very whole position taken, and anothe $50 for every position closes. That was a $100 for the life cycle of each position. His account was $10,000. During that year, he opened and closed the number of arounf 120 positions (an average of 10 positions each month). At year end, he has blown his account.
After I saw him distressed, I went and explained to him why he blew his account. He started to blame the market and traders, and the dollar and the euro. I told him no. It is your boker who caused this.
I made some quick math, had he paid 0 comissions on his trades which he made, he would have had $12,000 in his balance now (a profit of $2000 over his initial balance!!!). He was astonished!!!!!
Slippage: Now slippage is another story. I would prefer not to open a position at all, than to pay a heavy price for opening it because of slippage. This takes us back to part one, which is spread. As simple as that, slippage increases the cost of our trades, as if we are paying a very large spread.
Regards
Yanni
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