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The Spread and Profit?

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  • First Post: Feb 26, 2015 2:00pm Feb 26, 2015 2:00pm
Hello. If the spread is 2 pips does that mean I need to target 3 pips in order to make a profit? Thanks.
Quoting Forexpcb
Hello. If the spread is 2 pips does that mean I need to target 3 pips in order to make a profit? Thanks.
Can we assume you're trading on a demo..if not, would suggest that you move to a demo right away. As regards the query, the answer is obvious, but why on earth would you want to just target three pips??
I have 18 hours a day to scalp.
Quoting Forexpcb
Hello. If the spread is 2 pips does that mean I need to target 3 pips in order to make a profit? Thanks.
yes is your answer
thank you.
Quoting Forexpcb
Hello. If the spread is 2 pips does that mean I need to target 3 pips in order to make a profit? Thanks.
That would depend on how much you're risking to gain those three pips.
Quoting Forexpcb
Hello. If the spread is 2 pips does that mean I need to target 3 pips in order to make a profit? Thanks.
Ok am assuming that you are completely green in Forex Trading and it would do you a world of good to do some online courses and get the basics right. There are several online courses some free others require payment but you can start with the free ones for your level.
Now, the Answer is Yes and NO, sorry for complicating. The reason is when placing the order, things could change and the 3 pips target turnout to be something like 1 or 2 pips. It is Forex world after all. Additionally, when using live account, delays in executing order could lead to a shift in price. Therefore, it is better to allow a bigger room for profits, like 10 pips, and perhaps a stop loss at 5 pips. But as I noted, this is a lesson for another day once you get up and running in your trading activity. First seek more knowledge in the subject before starting.
Quoting Forexpcb
I have 18 hours a day to scalp.
firstly, no one answer no with your question.
and secondly, 18 hours a day to scalp ? what kind of trading system do you use here.
18 hours trade, that's epic hour for scalp trader.
Quoting Forexpcb
I have 18 hours a day to scalp.
Either you are an automaton or someone who just cant go to sleep at all..Jokes aside, eighteen hours and all of that, just to scalp??
Wouldn't you be better of as a swing trader? or even as one who uses fundamentals to trade?
Quoting Forexpcb
I have 18 hours a day to scalp.
My understanding is that you do not actually trade for 18 hrs a day making those micro earnings, but rather 18 hrs to get in and out as often as possible.

Scalping for 18 hours per day assuming a maximum of 15 minute per trade that results into a massive 72 trades per day, only a machine can do that, but you never know really.
Quoting moonshot
{quote} My understanding is that you do not actually trade for 18 hrs a day making those micro earnings, but rather 18 hrs to get in and out as often as possible. Scalping for 18 hours per day assuming a maximum of 15 minute per trade that results into a massive 72 trades per day, only a machine can do that, but you never know really.
72 trades a day is not that massive really. Have you seen transcripts of demo contests participants?
targeting 3 pips on a 2 pip spread is insane just for the simple fact that spread is always changing on most brokers. so your 1 pip profit, would be cut down if the spread increases even by the smallest amount. And lets not mention what 1 loss would do to your account and the work that will be needed to just recover from that 1 loss...depending on your stop loss, but whatever you choose, i am willing to bet you would need a success rate of close to 99.99% to be profitable...:/

take the pipsology course, it is a free...
Losers only have goals but winners have goals with a system - 'Scott Adams'
Quoting Forexpcb
Hello. If the spread is 2 pips does that mean I need to target 3 pips in order to make a profit? Thanks.
if your spread is 2 pips you need 4 pips just to break even and 5 pips to make a profit. You pay when you walk in the market and you pay on your way out.

you may find this post useful in determining how much spread affects ones trading.
http://www.forexfactory.com/showthread.php?t=524958
Quoting Sis.yphus
{quote} if your spread is 2 pips you need 4 pips just to break even and 5 pips to make a profit. You pay when you walk in the market and you pay on your way out. you may find this post useful in determining how much spread affects ones trading. http://www.forexfactory.com/showthread.php?t=524958

this is true, can't forget about giving up those extra pips when you exit a trade!
Losers only have goals but winners have goals with a system - 'Scott Adams'
Quoting walther6588
targeting 3 pips on a 2 pip spread is insane just for the simple fact that spread is always changing on most brokers. so your 1 pip profit, would be cut down if the spread increases even by the smallest amount. And lets not mention what 1 loss would do to your account and the work that will be needed to just recover from that 1 loss...depending on your stop loss, but whatever you choose, i am willing to bet you would need a success rate of close to 99.99% to be profitable...:/ take the pipsology course, it is a free...
LOL, I know..most scalpers or the ones who come online usually set higher pip targets, not much, but definitely more than the three pip mark for the very same reason..and given the eighteen hour day trading session scalping, one would think..nm
Sorry for the Question, but that is what the broker is making? this 4 pips? 2 on the way in and 2 on the way out?
Quoting Forexpcb
Hello. If the spread is 2 pips does that mean I need to target 3 pips in order to make a profit? Thanks.
No.

Assuming you are comparing like with like, (in terms of "roundtrip"/"per leg") s noted by Sys.iphus above..
Spread is only one element.
The key metric is Transaction Cost, which accounts for the totality of Execution costs .. including slippage etc.

There are enormous variations in TC between brokers.
The profitability of all scalping strategies are highly broker specific.
Quoting Forexpcb
Hello. If the spread is 2 pips does that mean I need to target 3 pips in order to make a profit? Thanks.
No. Spread is already embedded in the opening price of the transaction. Therefore, to obtain profit 1 pip is enough, regardless of the value of the spread.
Quoting cliffedwards
{quote} No. Assuming you are comparing like with like, (in terms of "roundtrip"/"per leg") s noted by Sys.iphus above.. Spread is only one element. The key metric is Transaction Cost, which accounts for the totality of Execution costs .. including slippage etc. There are enormous variations in TC between brokers. The profitability of all scalping strategies are highly broker specific.
I can't agree more. This is exactly what makes takes be aback when I see someone believing that a demo account can be an ideal way of practicing live trading. In my opinion, sue to issues like slippages in live trading, I think a demo account is better used for practicing various trading strategies, and perhaps getting to understand what moves what currency etc.
Finally, I think brokers are ever delighted when they see a scalper.
Quoting moonshot
{quote} I can't agree more. This is exactly what makes takes be aback when I see someone believing that a demo account can be an ideal way of practicing live trading. In my opinion, sue to issues like slippages in live trading, I think a demo account is better used for practicing various trading strategies, and perhaps getting to understand what moves what currency etc. Finally, I think brokers are ever delighted when they see a scalper.
Thank you for comment Moonshot..
I refer to the accountable cost metrics being discussed above (commission/spread/volume terms etc ) as "Considered Transaction Costs" (relative easy to quantify).
And the latency/slippage/execution type costs, as "Hidden" or "Unexpected Transaction Costs" The problem is that these cannot be accurately modeled in your broker Demo/Test data, since they are highly variable and Broker specific.

A recent Boston Technologies Blog by Anna Aratovskaya, quotes Rishi N Rang and his bookInside the Black Box,.. as follows..
" UTC/slippage accounts for more than half of all transaction cost combined. If you have already calculated your monthly Considered Cost, now double it - what percentage of your overall monthly profit and loss would that be?" ....
and goes on to comment on how difficult these costs are to model from demo/test data.


Institutional Transaction Cost Analysis has become a major focus in institutional trading.. and has exposed startling differences between different brokerage services.
I can only imagine what proper TCA would show if applied to Retail Brokers. LoL
Hope this of help.
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