How spread is calulated

As i know, spread is calculated on Base currency, But i want to know suppose i m working on
GBPUSD and the spread is running at that time is 3, so the money will be deducted after i run the trade in GBP 3$, or what…or i am getting it wrong.

Hi, spread is calculated on quote currency not the base it is a difference between bid and ask.
The value of 3 represents 3 pips difference not $3. It is deducted automatically when your trade is executed, market must clear the spread for you to be in profit.

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spreads actually calculates your profit and loss depending on the trade type…

It might be a useful experiment if we all keep an eye on our respective broker’s spreads through the week and post up the heaviest widening, from “normal”. I’ve seen spreads get to 10 times “normal” on occasion but it could be valuable to have a better picture when and why this happens and how bad it gets.

I’ll suggest we watch USD/JPY as a trial - right now, even over as little as 1 minute, I’m seeing between 0.6 and 1.2 pips, so a variation of 2 times already: its 1230hrs UK time, NY not yet open.

The money that will be deducted will depend on the pip’s value that you calculate using the quote currency.

I think you first have to determine your position size before you can find out the amount that will be deducted

Yeah you’re right here @obakeng27. Determining position size is very important, In fact more important than the entry and exit points, especially when day trading. We traders can really have a great forex strategy, but if we slip on the position size, not sure whether it’s too big or small, we’ll end up taking a risk that would either be too good or worse.

True… it’s more important than the entry and exit points, because it helps you stick to your risk management system. Even if it’s a little bit time consuming, it’s a useful tool that should be used consistently

What’s quite surprising about position sizing is that traders despite using the correct position sizing, they might end up losing more than the amount risked. All this because the stock gaps below the stop loss order.

Money management that also includes how much amount will be deducted is decided by calculating the position size. What you must ensure is that even when you’re trading in a volatile market, you need to use a small lot size even when your position size allows taking a bigger lot. Understanding it takes a thorough understanding, so to every beginner I’d suggest demo trade the strategy first on the platform like MT4. I say this because I trade on this platform by fxview and fxpro, and it seems to work well with the strategies I use.