Spread

I had wondered why when I was able to trade Binay with some degree of success , all be it with perhapps a lot of luck, that I had not a lot of success with forex. Realised it is spreads my broker has on some instruments. Up to 100 pips. I do not know how one is suposed to earn from there. 100 pips to break even. Then take profit cant be set closser than maybe another 50 pips and stop loss is about 100 pips other way. Just thought I would point this out for new ones.

PS I would not recomend Binary to any one. Very risky and often brokers need very careful screening. I dont know how to pick good ones and dont know of any good ones

Unless you are referring to exceptionally exotic currency pairs or exceptionally volatile moments in the market, I don’t understand where you are getting this from. Spreads for majors and minors with the mainstream brokers are nothing like 100 pips.

Perhaps you could give an example?

22.00 Hours (10 PM) Australian time USD/NOK Sell 8.1864 Buy 8.1964 Numourous others 30 40 50 pips. So no doubt once I am ready to go live will be looking for another broker.

Why are you trading something like Norwegian krona if you are a beginnner to forex?

Just for interest -
I trade forex by spreadbetting (which I appreciate is not available in the US and not even accepted as trading by some purists) but my particular SB provider is offering USD/NOK at 8.1980/8.2018 = 38 pips

As you can see, USDNOK is listed as an exotic currency, which means low liquidity and wide spreads. Whenever a pair is such that there is little volume then one has to think of it from the market-makers’ point of view. The banks have a duty to make a market containing both bid and offer. But they need to be able to offset their positions whenever necessary and if liquidity is generally low then their spreads will be wide inorder to be able to do this, at least without a loss.

It is hardly surprising to see spreads widen significantly during quiet periods, but, for example, now here in the North that spread is about 25-30 pips on this pair. This kind of currency pair is not generally at all suitable for speculative short-term retail trading. It is far better, cheaper and more successful to keep to the majors or selective minors.


Price right now - see how volatile the spread on these types of pairs can be but even when the spread shrinks by this much it still is vast compared with the attached EURUSD, for example!:



Thank you all for input. Very much apreciated.

Hi there.
I could only think of such spread during the rollover at 22:00 GMT. If that is the case such spread widening is typical for exotic currency pairs because of the rollover at that exact time. Usually 1-5 minutes before and after the rollover a low liquidity it to be seen on the market which is combined most of the times with extreme wider spread, especially by the less traded pairs like in your case.
I see on your profile that your location is Brisbane, e.g. your local time should be equal to GMT+10, so 22.00 AEST means 08:00 GMT. That matches the opening hour of the London stock exchange. That might be causing increased volatility on the forex market resulting again in widened spread.
Did you discussed this case with your broker?

I trade from Australia like yourself and my brokers spread on USD/NOK is at the moment around 35 pips.
If you are in the learning phase it would be unlikely that you would emerge from spreads like this without your account losing its healthy rosy glow.
As suggested by Manxx, stick to the majors or minors.
It would be like the difference between a relaxing Sunday afternoon cycle around the French countryside to a kamikaze death ride down a mountain. :46:
Whilst you are learning and until you have developed a long term positive expectancy in your trading, choose the relaxing Sunday bicycle ride!:slight_smile:

This pretty straight forward and hitting the nail on the head. Care is needed as newbies for us not to be caught in the supposed holy grail of forex.

I think that trading such exotic pairs is way too risky especially for beginners. I mean these spreads are huge. 100 pips…it’s too much and eventually not worth it. I also prefer to stick to the majors and from time to time if some other pair catches my attention, I start exploring and experimenting with it but usually it’s not too exotic with a ridiculous spread.

100 pips spread is too high . I will try this type of spread when had a large capital as well as good experience of managing it. High spread pairs are volatile mostly so we should not trade with them while having less deposit. I prefer to trade in major pairs they involve lowest spread.

Yes high spread as 100 pips with some exotic pairs is highly risky . beginners will fail to handle this spread. That is why most of the traders choose low spread pair for trading where they pay less spread and profit starts soon as market is moving to their side.

Well I trade USDRUB and my trades have been executed with average spread of 2-3 copecks with Hotforex, its 200-300 pips I think. But sometimes it can even widen especially during session openings to 1000 and more pips. So I consider it normal