This is my first post on babypips, so I can't really start without mentioning what an amazing site this is and how lucky I feel to have stumbled across it as a newbie trader. A special mention to ICT, without his posts I would still be trading in the dark ages.
I just have a quick question. Is it right that you have to add the spread to your stop loss? I had a stop triggered and the price was 4 pips away. The pair never reached the stop loss I had set, so I was a little shocked to find it had been closed.
An unnamed etoro representative told my they add the spread to the stop loss. Which they also did when I opened the position, are they double dipping or is this normal?
In my experience, they are not wrong if you are trading on floating spreads. Because i have ever experience more than 5 pips spread on my floating spread account. I would prefer to trade on fix spread, eventhough the spread could be higher, as i can avoid this kind of situation
That is 100% normal and you are not being cheated in any way it is a confusing to grasp concept but basicly on metatrader and most other platforms the price they show you is the bid price, not the actual price of the currency but the price they are willing to let you enter a sell trade at, there are always two prices that you can have displayed by your broker, the bid and the ask price, the ask price is the price that you buy at, and the bid price is the price that you sell at
Now what does this mean for our stop losses and take profits? In short whenever you place a long (buy) trade you can operate as normal, place your stops and take profits as you normally would completely ignoring the spread, but when you place a sell trade you have to add the spread to your stop losses and subtract it from your take profits, meaning if your regular stop loss is 25 pips and the spread is 5 pips, your new stop loss for that sell trade will be 30 pips, and if your take profit would be 50 pips normally on a sell trade you must make it 45 pips
Why? when we are in a sell trade we are shorting a currency, meaning the only way to get out of that trade is to buy back all of the money we shorted, so when our stop losses and take profits are hit all the broker does is make us buy back the position we sold, so when we sell we sell at the bid price but when we buy it back (at our stop losses and take profits) we do so at the ask price, and the spread is the difference between these prices, meaning that if price moves 25 pips against us from where we sold at the bid price, the ask price which is 5 pips higher would have already reached 30 pips, which is why you got stopped out, because our stop loss price is higher than the price we enter at our stop losses need to be placed higher than the price we entered at by the spread, hope that helps