Am I paying double spread? | Forex Factory

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Am I paying double spread?

  • #1
  • First Post: Jan 8, 2010 11:09am Jan 8, 2010 11:09am
Hi everybody, i am beginner and for many times i set up a demo account, i thought that i pay spread only once time for execution, but i misunderstood or it is misguide from broker side...as i have seen, i pay it twice...

For instance: My broker offer spread 3 pips, I am short on price 1,4444 i pay spread once, when i execute order, but i have a SL on price 1,4449 and price move on 1,4446 and the order get close, thus my spreads are not 3 but 6, 3 when i execute order and 3 when price nearly reach SL arenīt it? Is it normal? or it isnīt normal?

Thank for all your answers :-)

Regards
  • #2
  • Jan 9, 2010 3:20am Jan 9, 2010 3:20am
Quoting slovakiaguy
Hi everybody, i am beginner and for many times i set up a demo account, i thought that i pay spread only once time for execution, but i misunderstood or it is misguide from broker side...as i have seen, i pay it twice...

For instance: My broker offer spread 3 pips, I am short on price 1,4444 i pay spread once, when i execute order, but i have a SL on price 1,4449 and price move on 1,4446 and the order get close, thus my spreads are not 3 but 6, 3 when i execute order and 3 when price nearly reach SL arenīt it? Is it normal? or it isnīt normal?

Thank...
It looks like you misunderstand the concept of spread. You don't "pay" it. The spread just reduces your profit from the position and does it so only once - when your position is closed. When you buy a position you use the Ask price, which is +3 pips to Bid price. When you close it (sell back) you do it at a Bid price, which is -pips to Ask price. Consider this example:

1. Buy EUR/USD @ 1.4410 (Bid = 1.4407; Ask = 1.4410).
2. Wait 1 hour. The price moved up by 50 pips (Bid = 1.4457; Ask = 1.4460).
3. Sell EUR/USD @ 1.4457.
4. Your profit = 1.4457 - 1.4410 = 47 pips. The price moved up by 50 pips. Your loss from spread is 50 - 47 = 3 pips.
  • #3
  • Sep 29, 2010 11:21am Sep 29, 2010 11:21am
When you buy (either for opening of a long trade or for closing a short trade) you buy at a higher price called ask. When you sell (either for opening short trade or for closing a long trade) you use the lower price (bid). It is as simple as it.
  • #4
  • Oct 15, 2010 10:50pm Oct 15, 2010 10:50pm
Quoting enivid
The spread just reduces your profit from the position and does it so only once - when your position is closed.
As soon as you open a trade, your equity is down, so you pay the spread when you open a trade, not when you close it.
  • #5
  • Oct 16, 2010 2:20am Oct 16, 2010 2:20am
Quoting fierceman
As soon as you open a trade, your equity is down, so you pay the spread when you open a trade, not when you close it.
That's still a paper loss before you close the position.
  • #6
  • Oct 18, 2010 11:14pm Oct 18, 2010 11:14pm
Quoting enivid
That's still a paper loss before you close the position.
Your account equity is the true value of your account. If you had a $10,000 account balance and an open position that was -$8,000 you can call that a paper loss all you want, but your account equity is at $2,000 so that's a $2,000 account. This is where "hedgers" always go wrong, looking at account balance instead of equity.
  • #7
  • Last Post: Oct 19, 2010 3:32pm Oct 19, 2010 3:32pm
Quoting fierceman
Your account equity is the true value of your account. If you had a $10,000 account balance and an open position that was -$8,000 you can call that a paper loss all you want, but your account equity is at $2,000 so that's a $2,000 account. This is where "hedgers" always go wrong, looking at account balance instead of equity.
OK .
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