Do I add the broker spread to my stop loss & entry, or only to my stop loss?
Firstly the spread is not fixed, the broker widens or narrows it according to the total market risk they’re facing, the volatility of the market etc.
The spread is the difference between the price at which you buy and the price at which you sell. Chart prices are usually the bid prices, that is the price at which you sell. Refer always to the quoted prices to get an accurate idea of the cost of the spread.
Yes, I’m aware that brokers spreads are not fixed. I’m familiar with the spread, and see the quoted prices on my broker. My question was when factoring the spreads into a position, do I add the spread to my stop loss and entry? Sorry if I wasn’t clear the first time.
OK. Once you’re in a position, you only need to adjust the exit order price level to account for the spread. The exit order could be a stop-loss order or a take profits order and whether you need to add the spread or subtract it depends on whether the position is long or short.
If you are setting order levels from the chart bear in mind that most charts (but check yours!) are showing bids prices, i.e. sell prices. So if your pair has a 2 pips spread, the chart price will be 2 pips lower than the buy price at that time.
I think this only matters if you’re scalping… spreads should be insignificant if swing trading
If your trades are very short term… you should consider a raw spread broker… They have almost ZERO spread and a fixed commission. In my opinion much better suited for scalping strategies.
Also note that you always start the trade with a loss…
The ask price Will always be above the bid price. You buy for 1.21, they Will let you Sell for 1.20
You Sell at 1.20 the Will let you buy back at 1.21
You need to check for your plataform… but normally:
Stop Loss and Take Profit orders on Buy positions are triggered when the Bid price hits the order level.
Stop Loss and Take Profit orders on Sell positions are triggered when the Ask price reaches the order level.
Keep this in mind when setting stops, coz candle charts are based only on one of either ask or bid price. (In metatrader Default is bid if I’m not wrong)