Yes, yet again I am confused… when and where do you make a profit if the broker takes the spread every time there’s a spread??? The rest of pipsology school will make even more sense once this question and my other question is answered! Thank y’all ahead of time.
You take a profit out of the difference between your entry and exit prices, each time you open and close a trade, if the price has moved in your favour.
But the first pip or two of that profit in effect goes to the broker, so if the price moved 10 pips in your favour but the spread was 2 pips, you make only 8 pips. On the other hand, if the price moved 100 pips in your favour, you make only 98 pips. The broker always gets his 2 pips (if that’s what the spread is).
You’re effectively paying half the spread when you open a trade and the other half when you close it, in other words you pay one full spread per “round turn” (opening and closing the trade).
The spread can sometimes change a bit while your trade’s open, though. Spreads aren’t absolutely fixed and will vary according to the current volatility.
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The spread is just the difference between the bid and the ask exchange rates (or prices). We buy at the ask price and we sell at the bid price. An open buy trade gets closed at the current bid (sell) price. An open sell trade gets closed at the current ask (buy) price.
We seek to buy low and sell high with our long trades. We can also sell high and buy low with our short trades.
The broker makes a tiny bit off the spread because he is selling to us at a higher price (the ask is the sell price from the broker’s point of view) and buying from us at a lower price (the bid is the buy price from the broker’s point of view).
Market movement in favor of one of our trades is what makes money on that trade.
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Yet again another awesome response! Thank you Tacita I really appreciate it
This was a dope response too! In even more lamen terms for me to really piece it together . I’m trying to tell you it wasn’t sticking before you and Tacita responded!
Great! Many pips to you.
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Pips on pips on pips to you too 