1、CHIFLEY: What is the foreign exchange spread?Many newcomers to currency trading will ask a question: What is a foreign exchange spread? Although laymen are generally not familiar with the term, it is actually a very simple concept. However, the term is very important in foreign exchange trading beca
2、use both profit and loss depend on the spread of the currency pair.definitionForex spreads are the difference between the price you can buy a currency pair from the market (sell price Ask) and the price at which you can sell a currency pair (buy price Bid) to the market. This is why spreads are ofte
3、n referred to as buy/sell spreads. The selling price is always slightly higher than the buying price, which will cause you to suffer a slight loss in the creation of the position and the magnitude of the loss is the same as the spread - therefore, the concept of understanding the spread of foreign e
4、xchange spreads and seeking to provide the minimum spread is very important.Spread exampleThe EUR/USD spread is indicated by the 4th digit after the decimal point in the quote: the sell price is 1.4102, the bid price is 1.4102, and the spread is 1.4102 1.4100 = 0.0002 or 2 points.The GBP/JPY spread
5、is indicated by the second digit after the decimal point in the quote: the sell price is 134.17, the bid price is 134.11, and the spread is 134.17 134.11 = 0.06 or 6 points.The EUR/USD spread is indicated by the 5th digit after the decimal point in the quote: the sell price is 1.41023, the bid price
6、 is 1.41004, and the spread is 1.41023 1.41004 = 0.0019, which is 19 decimal point values or 1.9 normal points.The USD/JPY spread is indicated by the third digit after the decimal point in the quote: the sell price is 86.782, the bid price is 86.770, and the spread is 86.782 86.770 = 0.012, which is
7、 12 decimal point values or 1.2 normal points.How do you apply knowledge about forex spreads to your trading?Considering that you use the sell price when creating a buy trade position and use the buy price when creating a sell trade position, if you want to develop your own foreign exchange trading
8、system, always consider the spread factor. For example, suppose your system lets you use a 20-point stop loss (SL) and a 50-point profit-taking (TP). There are two ways you can do this:1. You can use the opening price plus the TP value (the short position is subtracted) and subtract SL from the same
9、 price point (the short position is plus). In this way, you can maintain win/loss values and ratios, but you increase the probability that the stop loss will be touched and reduce the probability that the profitable knot will be touched.2. Or, in addition to the above, you can subtract the spread from your TP and SL (the short position is increased). This will maintain the probability that the Stop Loss or Take Profit will be touched, but it will also reduce your chances of making a profit through a profit-taking and increase the probability of losing money due to a stop loss.
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