Calculating cost of spread in a trade

Beginner Questions
1

Hi,

Is there an easy way to calculate the cost of bid ask spread within a trade?

And is the bid ask spread applied to each unit of currency, or to each lot within a trade?

Thanks.

2

It depends what you mean by “easy”. It’s just something you have to be aware of, and allow for, and be aware that spreads can change/vary, according to circumstances, times and volumes currently being traded. Don’t assume that the spread when you close a trade will necessarily be [I]exactly[/I] the same as it is when you open it, especially if you hold it for a while.

It’s the same thing? To each unit, anyway: if the bid-ask spread price for EUR/USD is 1.1306 - 1.1307, for example, you can buy €1,000 for $1130.70 or sell €1,000 for $1130.60, and/or you can buy €100,000 for $113,070 or sell €100,000 for $113,060.

3

Spread cost = spread x pip value

Example: EUR/USD is 1.3000-1.3002, so 2 pip spread. If you trade a mini lot (10,000 units) the pip value is $1.

2 pips x $1/pip = $2 spread cost

4

Hmmmm … I have the feeling that Rhodytrader’s answer was probably more helpful than mine (and not for the first time) … :8:

5

thanks. Those answers were very helpful

6

Yes that is correct :slight_smile: