I learned that you pay spread on buy once the order gets triggered because we buy at ASK
and when we exit, we exit at BID since BID is the price we see on the chart and there is nothing to pay there only the spread at the entry when the order got triggered. Same for the
sell order: Enter at BID nothing to pay here since the entry is triggered by the BID price and only when exit (TP/SL) at ASK we pay the current spread at exit.
Now this guy Adam Khoo says that we pay the spread twice. I tried to calculate it in some way
and I do not understand the logic behind that. Here is the video where he say this:
i was under the impression spread is paid by client just the once, when you enter the market. with comms you can pay when you enter and exit, or usually just upfront (RT) …not spread though. just once.
Yes, spread is paid once. The width of the spread can vary of course several times a day, so you can never be 100% certain what the spread will be when you choose to exit until you see the quotes.
So the guy from the video is wrong in this case. Thanks for clearing that out and yes I understand that the spread can change during the day while my trade is still open.
The guy from the video isn’t wrong, he is only describing from a different perspective how spread works.
He says there are two type of brokers : market makers and ECN brokers.
For ECN brokers spread is almost non-existant.
So if you compare with the ASK and the BID prices quoted at the market maker, the price quote at the ECN broker will be somewhere in between.
So from an ECN account perspective, the person dealing with a market maker will pay the spread twice : when he sells, the BID price will be lower than on an ECN account; when he buys, the ASK price will also be higher.
I forgot to mention that the problem that I have is strictly based on the MM/STP trading cost
(first group mention by this guy). He clearly states that if we open a trade with a market maker or STP broker we pay spread at the opening and closing of the trade. If you go to 7:00 minute mark video he cleary say this. Im not interested on the comparision that he states between MM/STP and ECN broker pricing. Im interested only to know whether I pay the spread once or twice when closing the trade. I have been on other threads on forex factory and I saw a few traders that stated that the spread is only paid once. Then this guy comes and say that the spread is paid twice and yes I know that the spread is very thin on ECN brokers because ECN ask a commision too but this is not relevant to what I`m asking. Thanks anyway for replying!
It’s difficult to gauge how much spread you actually pay.
If the current spread is 2.0 pips and you decide to open a trade, your position will be -2.0 pips underwater immediately after opening the trade.
Now if the spread jumps, say, to 6.0 pips, and let’s suppose the actual price didn’t move, only the brokers spread widened, your position will be -6.0 pips underwater.
How much spread will you pay? You already paid 2.0 pips when you opened the trade, and now you will pay 4.0 additional pips if you close the trade. But that’s supposing that price didn’t move. If price moves, it gets very difficult to know exactly how much spread you’ll pay, but you can be sure it’s a combination of what you paid at the opening and what you’ll pay at the closing of the trade.
Now let’s suppose the broker applies a fixed 2.0 pip spread that never changes.
That’s when you can say that you pay the spread once. Because no matter when you open or close a trade, the difference between the BID and ASK quotes will always be 2.0 pips. But that’s theory.
I know that spread can widen during the day while the trade is open but this is another topic. I was interested if I pay the spread once or twice in case the spread stays the same. Thanks for the reply!