I’m looking for a definitive answer about when spread is applied on a sell limit order. My understanding is on a buy limit order the spread is applied at the start (when the order is made). On a sell limit order the spread is applied at the end (when profit is taken or when loss occurs).
This is true in stocks …
Is this different for forex … Oanda seems to apply spread at order entry for both buying and selling a currency pair.
• When you enter a SELL LIMIT order, you are placing an order above the current market to enter SHORT if price rises to the level specified in your order. If price rises as expected, and your SELL LIMIT order is filled, it will be filled at your broker’s BID price.
Upon entry, your P/L will be stated as the current ASK price minus your entry price.
In other words, you enter your position with a loss equal to the BID/ASK spread.
• Similarly, when you enter a BUY LIMIT order, you are placing an order below the current market to enter LONG if price drops to the level specified in your order. If price drops as expected, and your BUY LIMIT order is filled, it will be filled at your broker’s ASK price.
Upon entry, your P/L will be stated as your entry price minus the current BID price.
In other words, as in the above example, you enter your position with a loss equal to the BID/ASK spread.
All forex brokers apply the spread at order entry, as described above.
Look it’s real simple … Spread is always applied on the buy part of a transaction
As with stocks “buying” a currency pair you pay bid + spread … “selling” a currency pair means you’re actually borrowing the currency pair from the broker at the bid price with the expectation of “buying” that currency pair at some later date at a price lower than the bid - spread.
Spread is always applied on the “buy” part of a transaction.
Oanda is not doing this. They are applying bid + half the spread to a transaction whether it is buy or sell. In other words you are buying or selling to the midprice price on each transaction.
I’ll leave it to others to figure out what that means as far as trading … my thoughts are since they control the spread it favors the broker.
About the broker spread, you can check on their trading term and condition. Check it that the have fixed spread or dynamic spread?
In my trading, I am comfortable with the fixed trading spread, I see during the high voltage news, brokers (not all brokers) increase the trading spreads if traders use dynamic trading spread.
I too am comfortable with fixed spreads. Bid + fixed spread … bid - fixed spread I know exactly when I start making a profit or taking a loss.
My problem comes in when the rules change and companies start inventing "half spreads"to get money up front on the sell side of a transaction. The idea that I might pay two different spread prices … one at the beginning and one at the end of a transaction throws my accounting off not to mention making me think my broker is trying to squeeze an unearned dollar (rob) out of me.
Just troubling is all … thanks for the response.
You are always welcome man; thank you too for your words.