I check the spreads for my broker and I see that they are somewhat high. But in the system I am using, I am making like 5 pips profit per trade. So, I was wondering, does the demo account that I am using take into consideration the cost of the transaction, that is, the spread that the broker will take from the transaction or do I trade in a demo without cost implied. Thanks.
That’s pretty easy to figure out. When you open a trade does it start out at zero, or does it start out at a negative number?
Another way to find out is to compare the price you bought at to the actual price at the time of trade.
Thanks. Will be keeping close attention to the above.
Some brokers will charge you a commission in addition to spread, so keep that in mind. If you are using MT4, you will see a commission column in closed trade section.
Also keep in mind that the spread is generally wider on real account than on demo and you will get slippages on real account as well at time. I would try to aim for around 15+ pips at the time to be honest. Less on less volatile pairs.
If your spread is 2 pips and you are aiming for 5 pips, your transaction cost is effectively 40% (2/5 = 0.4). Its still high with 15-20 pips also but 5 pips is a suicide in my opinion unless you are exceptionally good
My broker offers a standard and ECN account. For the ECN account, they charge a fee of $4 per trade with lower spreads, but for the standard account, they use floating spreads. I think the lowest spread on the standard account is 1.8 on EURUSD. Am I being cheated by the broker? Is the ECN account better than the standard account?
It’s huge! Even you are doing scalping; not suitable environment for short term trading.
Sorry, I failed to mention that it is $4 per lot traded on any position. That means if I trade 0.1 lots it is $0.4. Is it still huge?
It’s depends on you; if you are okay with this & happy on their service. But you can compare with others broker!
ECN is better. You want your broker to act as a middle man that is matching your order against other traders in the market for which broker gets paid commission regardless of whether you make or lose money. What you don’t want is broker which takes the other side of your trade ie makes money when you lose money as they may be more inclined to manipulate price.
$4 is not bad if it is per both side ie $2 for entry and $2 for exit. So if you are trading eurusd then this would be equivalent of adding around 0.4 pip to spread. So you should see how much the total would be per trade spread and commission and compare across different brokers