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Author Topic: Spread is king?  (Read 27359 times)

Offline pipsbuster

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Spread is king?
« on: October 03, 2014, 01:31:41 PM »
It has always been so with me that the lower the account spread, the more profits from trading. What sense does it then make to go for higher-spread accounts?

Offline drunkfx

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Re: Spread is king?
« Reply #1 on: October 27, 2014, 05:55:19 AM »
Trading costs always pull your trading back, hampering profit earning process, making changes in probabilities against you. Under no event high spreads may be something to benefit from, of course, if you are not the broker. Particularly undesirable and even dangerous spreads can be for scalpers, which assume risk frequently, exposing deposit for numerous spread charges.
According to my personal scalping experience, hunting for low gains, for example 20-30$ from a trade, when average spread for EUR/USD is 0.5-0.6 pip (Hotforex Premium account ) allow me to stay in profit. With that number of profitable orders, even in the case of minor spread increasion, my trading would go into a trouble, because 60% of my profit would be grasped by spreads..

Offline jemook

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Re: Spread is king?
« Reply #2 on: October 27, 2014, 06:08:31 AM »
Total trading cost is very important: ie spread + swap + commission + deposit cost + withdrawal costs.

Spread is only a part of the equation but can be one of the biggest costs to trade.

Depth is also important if you are trading bigger lots as a broker offering .1 EURUSD spreads could just be showing that for 50k depth and you could get slipped to .4 spreads if trying to hit higher than 50k position size.

I personally think it's better to pay commission than have it built into spread as a higher spread means your SL will get hit quicker.

Cheers
Jem


Offline Bryon Caldwell

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Re: Spread is king?
« Reply #3 on: November 11, 2014, 07:43:58 AM »
Yeah, Spread is King but Few broker charges a lot. I know so many Good brokers that charges 3 pips Spread for regular currencies. On the other hand, few brokers also have only .5 or 1 pip spread commission
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Offline alixfx

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Re: Spread is king?
« Reply #4 on: November 12, 2014, 02:55:47 AM »
I am originally  an equities and derivatives trader and my portfolio used to include small caps and covered warrants, so as you can guess some of the spreads on these products were huge.. but this never significantly ate into my profits, so I never felt that 'spread was king', but rather my understanding of pricing and market liquidity.

However I am now a few years in to trading forex daily, and although I still trade trends in one of my accounts I run a simultaneous scalping strategy where I aim to make the real money. So in that case I agree and for a forex scalper, Spread is certainly King..

Offline hashim

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Re: Spread is king?
« Reply #5 on: November 14, 2014, 01:33:03 PM »
spread are king of all scalpers, and day traders but they sometime doesnt bother and never have a proper understandinghow spread affect our trading result. for example i had monthly total order at average 150 transaction on EURUSD, at first i use non ecn broker service, 2 pips spread on eurusd which means, 150 x 2 pips, 300 pips monthly cost in total, but now my result getting better as I moved into armada market, an ECN brokerage service with 0.3 spread charged on eurusd, spread cost are 0.7 pips x 150 trades equal to 105 pips monthly cost. have anyone ever consider how spread cost your trade. and yess indeed ecn brokers help me alot, now i have additional 195 pips profit, consider spread as a king, serve his right majesty, and he will taking care our account performance. so, when spread are the King, who's the Queen then ?? anyone ?

Offline SpreadGuy

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Re: Spread is king?
« Reply #6 on: November 16, 2014, 01:35:40 PM »
Well the king is your skills to identify a trend. Your position can easily cover even 100-200$ spread if you guess the direction of trend correctly :)

Offline hashim

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Re: Spread is king?
« Reply #7 on: January 06, 2015, 05:32:59 PM »
Well the king is your skills to identify a trend. Your position can easily cover even 100-200$ spread if you guess the direction of trend correctly :)

hmm nice thought, but i think i wouldnt take those gigantic spread for my trade. well, fx trading is a business to begin with. a 100-200$ fee per transaction, are bad for any business. unless your plan are just to put 1-2 entry trade in a year, and then quit trading.
consider i put 10 entry a months, for whole year i put and entry 120 trades in total. said i inherent the 'king' skill to identify the trend for consecuentive 100 trades and the rest 20 are end up losing one.
so how much it does cost then ? 120 trades x 200$ spread = $ 24.000 transaction cost!!! for years. in my country for those amount I can barely purchase a brand new car. and i dont think anyone here would be crazy enough to begin a business with a fixed 24k transaction cost. i bet you wont :D

Offline indicator

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Re: Spread is king?
« Reply #8 on: January 19, 2015, 04:46:55 AM »
It has always been so with me that the lower the account spread, the more profits from trading. What sense does it then make to go for higher-spread accounts?

Its a simple math, 1 pip difference of spread costs you 100 pips after your 100 trades on a particular pair. So spread does matter to a trader.

Offline 999cjb

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Re: Spread is king?
« Reply #9 on: January 19, 2015, 11:17:55 AM »
It has always been so with me that the lower the account spread, the more profits from trading. What sense does it then make to go for higher-spread accounts?

Its a simple math, 1 pip difference of spread costs you 100 pips after your 100 trades on a particular pair. So spread does matter to a trader.

There are other considerations. If that 1 pip lower spread is accompanied by a commission on opening each trade and another commission on closing each trade, as practised by FXCM and others, you may be better off going for the higher spread.

Offline drunkfx

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Re: Spread is king?
« Reply #10 on: January 20, 2015, 08:28:56 AM »
Absolutely agree. Comissions should be carefully calculated, based upon broker statements about transaction costs. I do prefer to trade without commissions but exclusively on highly volatile market as broker markups can't be compared in size with spread widening occurring there/ Commission based account is for high-frequent traders (scalpers) as row spreads is something they're looking for. There are 3 option on Hotforex of how to optimize your transaction costs - fixed spread, spread account and commission one with raw spreads. My choice is upon second one..

Offline Efx123

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Re: Spread is king?
« Reply #11 on: January 20, 2015, 08:19:10 PM »
Most people would lose money even with 0 spreads and 0 commissions. But banks will always make money.

Offline PsychoPipKiller

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Re: Spread is king?
« Reply #12 on: January 23, 2015, 03:40:50 AM »
In my view, spreads / commissions are only important when scalping - depending on the pair. Long term trades its a non-issue really.

Offline hybrid

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Re: Spread is king?
« Reply #13 on: June 07, 2015, 04:38:19 PM »
While trading with any pair we first of all see its spread . low spread brings profit soon as market moves up or down. With high spread we have to wait for much time for pips making.

Offline resistance

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Re: Spread is king?
« Reply #14 on: June 09, 2015, 04:20:10 PM »
It's good to trade with pair with low spread in trading because it will be easier to earn profit with low spread pair, especially for scalpers, It is lower risk too when you used low spreads pair although it doesn't mean that higher spreads will be lower profitable than lower spreads. It's back to trader's capability to find out good timing to entry and exit point. If you can trade well with GOLD, then it is possible to gain good amount of profit although GOLD's spread is high enough.

 

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