Do i pay the spread too?

Discussion in 'Forex Trading' started by cashmoney69, Apr 11, 2007.

  1. on gbp/usd I pay a 4 pip spread or 40.00... so out of 10 pips, i make 60.00..simple.

    but how does the spread affect a losing trade?.. If i'm down 3 pips and want to get out, would I still get charged the additional 4 pips to get out of a losing trade to a total loss of 70.00?

    cm
     
  2. Lucrum

    Lucrum

    Unless your trading at one of the ECN's you'll buy at the ask and sell at the bid every entry and exit, winning or losing.
     
  3. Another way to think about it is this: the moment your entry order is filled, you start out in the hole / down 4 pips, at that very moment. That figure (negative spread value, here -4 pips) remains part of your Unrealized P&L throughout the duration of the trade. When your exit order is filled, that figure becomes part of your now Realized P&L for the just closed trade.

    That perspective might help you become more keenly aware of the true R/R ratio of short-term / short-distance trades, much worse than the apparent R/R rario at first glance (when the hurdle to overcome is a 4-pip spread). "Worse," as in -- much higher % win rate needed to break even or better.

    TP ... SL ... apparent R/R ... true R/R ... true / apparent

    6 ....... 6 ....... 1:1 ....... 5:1 ........ 5
    6 ..... 14 ..... 0.43:1 ..... 1:1 ..... 2.33
    14 ..... 10 ..... 1.4:1 ..... 3:1 ..... 2.14
    24 ..... 32 ..... 0.75:1 ..... 1:1 ..... 1.33
    100 ..... 50 ..... 2:1 ..... 2.26:1 ..... 1.13

    Note the trend in the last column as your TP and SL increase.