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Beginner's question about pips spread, in and out

  • #1
  • First Post: Aug 12, 2006 11:45am Aug 12, 2006 11:45am
I have alittle confusion here, i been demoing for about 5 or 6 months now, and my question is:

say if i enter a market with a 4 pip spread, and if the market moves good, say 40 pips in my direction, the spread still being 4, now if i close my trade, will i have profit of 32 pips? or 36 pips? I know it cost me 4 pips to enter, but will it cost me 4 pips to exit? This is my confusion.

thanx

- J
  • #2
  • Aug 12, 2006 11:50am Aug 12, 2006 11:50am
the spread is the spread you get charged once on entry.

Have fun and good luck
  • #3
  • Aug 12, 2006 11:51am Aug 12, 2006 11:51am
Quoting hunter101
I have alittle confusion here, i been demoing for about 5 or 6 months now, and my question is:

say if i enter a market with a 4 pip spread, and if the market moves good, say 40 pips in my direction, the spread still being 4, now if i close my trade, will i have profit of 32 pips? or 36 pips? I know it cost me 4 pips to enter, but will it cost me 4 pips to exit? This is my confusion.

thanx

- J
Hello,

You profit will be 36 pips. You only "pay" the spread once.
--- FX Confidential ---
  • #4
  • Edited 1:41pm Aug 12, 2006 1:25pm | Edited 1:41pm
The spread is the difference between the bid and the ask price. When you buy you pay the ask price. when you sell you get the bid price.

Bid price is the price your broker is willing to buy from you your short or sell.
Ask price is the price your broker is willing to sell to you for your buy.

Therefore if the price is 1.2800 bid and 1.2804 ask.

You would buy at 1.2804 when the chart shows 1.2800. That is the spread. Now if the price goes to 1.2840. You close the trade at the bid price, which is the price displayed on your chart. So the math looks like this

1.2840 - (1.2800 + .0004 spread) = .0036

hope that helps
Scott
  • #5
  • Aug 12, 2006 4:08pm Aug 12, 2006 4:08pm
Thanx, i been demo'in for months and that was one of my questions. I saw a vid on a successful trade, and the guy in the vid said something like "you will pay the spread to get out of the trade" or something like that, which made me ask the question here. Thanx for inputs, im such a noob, thanx that i wont go live til next month!
  • #6
  • Last Post: Aug 12, 2006 9:30pm Aug 12, 2006 9:30pm
Perhaps his trade was a short trade. If this is true, then the video is correct. the spread would be paid when the trade was closed with a buy order at the ask price.
So, when buying, the spread is paid at the beginning of the trade.
When shorting the spread is paid at the end of the trade...

It was a very good question. and also applies to other types of markets.

Thanks Scott



Quoting hunter101
Thanx, i been demo'in for months and that was one of my questions. I saw a vid on a successful trade, and the guy in the vid said something like "you will pay the spread to get out of the trade" or something like that, which made me ask the question here. Thanx for inputs, im such a noob, thanx that i wont go live til next month!
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