Hoping someone could clarify the following for me.
I want to trade a system that goes either long or short when it breaks out of a range. It has a SL of 20 pips and a PT of 40 pips. I use bid charts and when I go long I just add the spread to the long order.
My question relates to the short order. I want to be risking the same as the long order ie 20 pips. So to enter, I sell short at the desired price and don’t account for the spread. Do I add the spread to the SL and TP on the short?
Lets say the spread is 3 pips on the short trade. Would I then have a SL of 23and TP of 43. Is this correct and would this risk be the same as the long SL of 20?
The risk amount is now based on 23 pips not 20.
You have to be careful about the spread.
Something else to watch out for:
I had an argument with my broker because a trade activated 4 pips before it was supposed and went on to stop me out. I set a buy stop for 1.6005 and it activated at 1.6001 and took a nose dive. The price never retraced back up to 1.6005.
When you enter the SL and TP do you enter them as actual price levels, or in numbers of pips?
If you enter them as pips then you would enter 20 and 40, just like you do with a short trade, but if you are entering them by typing in a price you will need to account for the spread.
For example, you want to go long when price breaks the 1.5000 level on your charts. If your spread is 2 pips and you want a profit of 40 pips on this trade you need to set your takeprofit at 1.5042.
But if your platform lets you just type a number of pips in for the SL and TP then you just need to enter 40 pips, since the platform will base everything on a long trade off the ask price you don’t need to add in the spread.