I have attached image file to show on graph what I am referring to. I will automatically understand same logic for long position (entering on uptrend) also so if the logic is anyhow different when entering long position then please let me know.
If you don’t mind me asking: How is possible that I am in currently in lose (opened position active) in short position even if the price is UNDER both entry point and UNDER support line which, theoretically, must be crossed downward in order to open short position?
Even if I was on any other time period chart, the current lose (position still opened) would obviously be the same so time of chart has nothing to do with this. I know what does ‘‘spread’’ mean but I don’t know what did you mean? Could you please explain more in detail what could be the reason for this - what im asking in my first post?
Spread is the difference between the buy and sell price - this is why all trades start off with an immediate loss.
I pointed out that you’re on a one minute time-frame because what ‘may look like a considerable profit’ could in theory not even exceed the spread. This ‘could’ be why you are in a loss, and is most certainly going to be the reason.
And if you understood spread as you point out in your ‘first post’ you would not need to ask such an obvious question.
So you are saying the difference between buy and sell price is the reason why i am in lose even if the price is below my entry price (stop sell) and below support line. Obviously downward cross of support line happened. But will be this difference later refunded? If yes, how much later? When i close position? Or how would i get my refund of this difference?
I cannot read the numbers on the chart in your picture, but depending on the pair you’re trading the spread can be pretty high. My platform is showing NZD/CHF with a spread of more than 6 pips. It would show my entry position where I entered, but I’d still be 6 pips down, either way. The difference will not be refunded.
What pair is this, where did you enter (numerically), what is the spread, and what is the current price (in this specific picture)?
You are asking me for cadchf. Entry point was 0.76577 and the current price on picture (i repeat: on picture and not current price right now when i am typing this message) was 0.76535. I should had been in profit since i was in short position but it is showing, as you can see in the bottom right corner (brown circle) it was a lose. Probably due to difference between opening and closing price at the exact time of entry into short position (at exact time of opening the position) but saying this doesn’t help understanding the reason at all.
I am looking at prices and chart for CAD/CHF from my broker (although this is a UK spreadbetting company, the principles are the same).
Currently, Bid is quoted at 0.76001, Ask is 0.76051. Shorting at Ask 0.76051 immediately places the trader in a losing position by 0.00050. This spread will widen considerably near the London and NY opens and closes, and prior to CAD or CHF or certain other news announcements like NFPR’s etc., and at any other time according to events.
However, also beware of the price point used by your provider’s charts - charts can use either the Bid price or the mid-price, which is a notional average halfway between the Bid and Ask prices. My provider uses the Bid price on their charts but check your own charts whether is Bid or Mid.
On top of that, the company’s charts fluctuate much faster than their quotes. There is never much drift in points between the two but the chart Bid and quoted Bid are necessarily therefore not always the same at a particular moment.
Obviously, the chart gives no indication as to spread at a certain point, nor how spread might have been widened - i.e. by raising the Bid or dropping the Ask or altering both?
puppy, I was using NZD/CHF as an example, but CAD/CHF usually has a higher spread on my platform as well. At even a 5-pip spread, those number you were looking at you would still be negative by .00008
You would need to reach 0.76527 (assuming the spread was 5 pips, give or take if it changes) just to break even, if your entry was 0.76577.
Although this is offtopic, I believe you are mistaken here. You cannot enter short position using Stop (or Stop Limit but e.g. Metatrader doesn’t support this type order) order according to market ask price. When you enter Stop (not stop limit but stop - big difference surely) you define to which price trend must go downward and then when this EXACT price is reached or lower the position is opened for same exact price or whichever is lower one if the previously defined ‘‘exact’’ price is not reached but downward crossed (e.g. price goes directly from 0.00058 to 0.00054 without touching entry price 0.00056). You might have been referring to entering Short position with market order and not stop order but even in this case, to enter Short, you need to sell and you close it with buying back. So when you are selling, you always look at BID price and not ask price. It might be your typing mistake although what I have typed in this paragraph has nothing to do with my question so its offtopic.
Even if I was in correct direction (downtrend) below the support line (entering short position), the profit was shown and it seemed to be larger than 0.00008. Don’t know who and how is going to refund that because it seemed like my work (putting support line, analysis, opening short position etc) was done correctly but now I need to be financially responsible for something I haven’t done? This is very unfair not just to me but also to other traders as they might be having same situation. Jezzode was indicating that the situation might happen because of the difference between closing price and opening price of identical (!) candle that occurred when short position was opened. Not sure why 0.76527 but i surely either reached that or downward crossed (without touching) that. However at later time I have no way to know if ‘‘starting lose’’ which could be better defined as ‘‘unfair lose’’ was refunded into the current counting of profit or lose.
When trading on the forex, you will always be subject to the spread. Everything can be done correctly, and you still also have to overcome the spread. When you open your position, long or short, you will be a negative position immediately.
What tommor was saying was that if you sell at the bid price of 0.76001, which is shorting, while the ask price is 0.76051, you will be negative by 5 pips, and the price will need to move 5 pips down for you to break even. If the bid goes down, the ask goes down too, the spread remains. Breaking support is great and all, but the profit or loss is not contingent on it. It looks like, in your screen shot, that the price is just above your position. Where was the profit shown? Based on the numbers where you entered and exited, I’m going to guess that the spread was 5 pips, or maybe 4.9, and your position size was 2 mini lots. at 0.76527 you would break even because 0.76577 - 0.76527 = 0.00050. 0.00050 is the spread, and is equal to approximately $5.00 at that position size. At 0.76535 you would be negative, because 0.76577-0.76535 = 0.00042. 0.0050 - 0.0042 = 0.00008, which would be worth approximately $1.62.
Starting at negative because of the spread is part of trading that pretty much every trader has to deal with (at least on the retail side). Pairs like USD/JPY or EUR/USD usually have tighter spreads than the CHF pairs, in my experience.
As far as being responsible for something you haven’t done, consider the spread as if it were the commission for a stock trade. It’s the money you have to pay to make the deal.
Does any of that help you understand better? I’m happy to try to explain it a different way if it doesn’t.
Thank you for your detailed explanation but at the beginning of your reply, you were referring to the difference between higher market price (whether bid or ask - in your example the higher is market ask price) and lower market price. Later in the same reply you were referring to the difference between opening price and closing price of exact candle (regardless of time period set on chart) that was being occurred when i opened position.
So what is now true:
[I][U]Profit (if correct direction of trend) will be visible after the difference between market ask and bid price will be zero or positive[/U][/I]
or
[I][U]Profit (if correct direction of trend) will be visible after the difference between opening and closing price of candle that occurred when position was opened will be zero or positive[/U][/I]
For me is more important to get info which of this italic underlined facts is correct, however I assume the difference is calculated that the price must still go for that ‘‘relevant difference price’’ (from negative to zero) deeper into the wanted/needed direction.
I think there is a little bit of language barrier here, I was never referring specifically to close of candle. I meant only the market price where you enter your position, and where you exit your position, as that is all that matters as far as determining realized profit/loss.
To answer your question, profit (if correct direction of trend) will be visible after the difference between market ask and bid price [U]when you entered[/U] will be zero or positive.
To more accurate statement would be “profit (if correct direction of trend) will be visible after the current market price is greater than the ask price when the position was opened (if long), or less than the bid price when the position was opened (if short).”
I agree with you Jezzode as the spread for the intraday traders and for traders that place an order to gain less than 10 pips in an order, seems higher than from a long-term trader.
