What is a weekly trading system spread?

Everyone drew attention to the fact that after the opening of the deal it immediately finds itself in a small minus. It is not fraud on the part of the broker and not failure in the operation of the terminal - it is all the fault to have a spread on the currency pair. Today we will understand what the spread is and how much it affects trade efficiency.


All assets traded in exchange markets have two value options. These are the top two prices at which you can currently purchase or sell an asset. The first of them is presented by the seller, and the second, respectively, by the buyer. Liquidity of the asset, in other words the volume of trades affected by the difference between sales and purchase prices and is called the stock exchange or trade spread.


First of all, when interpreted verbatim, the spread is the difference. In this case, the difference between prices set for purchase and sale. Depending on the asset, they may differ tens and hundreds of times. As a conditional example, one can consider the fact of how Gazprom shares are quoted, when 135.57 rubles is set as the best sales price and 135.55 rubles is set as the purchase price. It is the difference of 2 kopeks that can be considered a spread. If we talk about a different trading instrument, with less liquidity, the spread can be much higher and reach several rubles.


In making the transaction, the trader receives a loss in the amount of F myforex spread by the machine. This is because all assets are purchased at the value offered by the selling party and, therefore, to sell the asset more quickly, it is necessary to take into account the prices of those who would like to purchase them, but these figures will always be lower by the amount of spread.


For example, in some cases it will be necessary to wait for the moment when the quotations will rise by 0.5% with only prophite in the form of an output of zero. In order to make a correct comparison of the myforex spread relating to different assets, it is preferable to use percentages rather than absolute numbers.


Spread in Terminal

In order to quickly and more clearly imagine what the spread is, it is best to contact the weekly trading system terminal directly. This will help to understand how it can be taken into account in trade transactions.


An example is a chart with a euro/dollar currency pair. The graph shows the value currently available. When you click the "Open new order" option, you can see two prices and, accordingly, two possibilities: the price at which the sale is possible (called "Bid"), as well as the price at which the purchase is possible (called "Ask").


But why are there actually two prices, while only one is on the chart? The answer to this question can be illustrated very easily by drawing a parallel with the currency exchange point, where for each currency there are two prices: for purchase by the bank and for sale. At the same time, the price at which the bank acquires currency from the client is always slightly lower than the average value presented in the form of an official rate established by the Central Bank.


At the same time, the price at which the bank itself sells the currency to clients is higher than the average rate. Perhaps you have already guessed that the bank receives its income from the difference thus established. A similar situation exists in Forex 's currency market. Thus, the margin between the two prices at which the currency is bought and sold and is a spread. The spread of currency pairs is exactly what goes into the broker 's account as commissions.


Varieties of Forex stock spreads


Trade spreads may refer to one of two varieties: they may be floating or fixed. Fixed, for the most part, can be found in the Forex market, where the difference between purchase and sale prices is set by brokers on their own.


In most other cases, a floating currency spread is almost always used, the size of which is determined based on the emerging market situation as well as an asset. And even if at first glance its size is determined somewhat spontaneously by the participants, in fact, the exchange carries out very strict control. In particular, this is done by marketers, whose duties include ensuring high liquidity of traded securities, as well as eliminating the excessively large indicator of spread. In some rare cases, in case of excessive rapid movement of quotations in one of the directions and there is a serious expansion of the spread, at the same time the exchange has the right to stop trading with this instrument for a certain period of time.


The spread considered in the context of the options market represents two options items - long and short. The base for both are the same securities. But there is also a situation in which there is a combination of a long position on one of the assets with a short position on the other. Spreads of this kind can be based on both futures or stocks and options. Thus, categories of spreads such as intermarket and intra-market are identified.


Inter-market and intra-market spreads

In-market products are characterized by the use of identical weekly trading system instruments or goods.


For intermarket markets, it is possible to work with two different markets. One of the most indicative examples is the market of T-bonds and municipal bonds. It is possible to form a market of this kind using stocks, provided that there is a tendency for them to move simultaneously synchronously.


In some cases, the situation may be such that differences in related markets are quite critical. This provides an opportunity to generate good revenues from trading markets against each other. The presence of a cross-market relationship makes it possible to make a profit on an inter-index spread. In this case, there will be no need to predict the direction in which the stock market will begin to move. Most importantly, the traceable relationship between indices and their changes.


The spread size is based on the selected currency pair. Some couples, due to higher popularity have a smaller spread, others, found much less frequently and having less liquidity - more. At each opening or closing of the transaction, the broker records on his account profit in the form of a spread, which can amount to from a share of a point to several points. When a customer buys, the broker profits when the transaction is opened and when it sells when it is closed.


Purchase and sales spread

When the transaction is closed, some funds are always lost or purchased by the customer. At the same time, the broker earns his own when the deal opens. It is important to remember that the sale is based on the value displayed on the chart (equal to the bid price) and the closing of the item is posted to the ask price.


How do I consider the spread when I make deals?

Teek Profit and Stop Loss when buying

If it is possible to install large stop loss and large teak profits spread does not play a particularly important role and it can not be paid excessive attention. Because his share in this case is too small. When weekly trading system on daytime schedules and having large teaks and big footsteps, the spread may not notice, as it is unable to have any meaningful impact. But in intraday trade, when teak-profites reach not 100-200 points, as in the first case, but only 10-20, it turns out that the spread is assigned an important role.


In terms of purchase deals, in general, the situation with them is much easier. First of all, remember that the purchase is made at a price slightly higher than what was displayed on the chart. If there is a signal on the chart, the target is not counted from it, but from the moment (point) at which the purchase was made. In such a situation, by putting a teak-profit on purchases, it is necessary to add to the moment of appearance of the signal tek-profit and spread. In the case of a Euro/US dollar pair, the spread will be extremely small and can often be ignored. For the same pairs whose spread exceeds two or three points, they should be added to the teak profit. Stop loss is also counted from the moment of signal appearance.


Separately, it should be noted that when the deferred order "Buy Stop" is issued, the activation of the delayed warrant will take place a little earlier than the moment when the price reaches that point on the chart.


Teek Profit and Stop Loss on sale

When selling to a trader, it is beneficial to lower the price, and in order to limit the likely losses, he has to expose the level of stop loss. When entering into sales deals, stop loss activation occurs slightly earlier than when this level reaches the price. Why is this happening? The same principle applies here as with purchase orders. The purchase, and when the sale is closed, it is actually about the purchase, the price of ask is taken as a value slightly higher than the market value. Which means that the stop loss is activated at a time when there is a very small gap between it and the price. And the bidder should take this into account if he does not want to include stop loss on sale due to spread. In order to avoid this, it is necessary to put the stop loss at a higher level when carrying out sales operations.


Stop loss is added to the spread value and is exposed slightly higher from 0.5 to 2-3 points, depending on the spread of the currency pair.


And how does the situation arise in the case of teak-profite? In sales, the teak profit is billed with a lower figure than the market price level. The activation of the teak profile in the case of a sale takes place below the line visible on the chart, as the price of closing the warrant is ask and it is higher than the current price on the chart.


For an existing sale, the current price will be the price itself and the spread added to it. And at the moment when the price on the chart reaches the specified line to start activation of the "sale" teak-profit, it will have to overcome another half of the point. If a deferred order is put up for sale by Stop Sell at a level lower than the price currently available, activation will occur when prices touch the level taking into account spread.


Expansion of spread

Under certain conditions, namely, if there is an ECN account, it is possible to observe expansion of the spread. For the most part, spreads are low, which is undoubtedly positively reflected in such accounts, but when news of an economic nature is published, the spread expands and it is likely that the stops of the loss, the teak-profit or the deferred warrant will work, even though the price was seemingly quite far from it.

Comments ()