Hi AlvinP -
Its a constant surprise to traders new to longer term trading how wide spreads can go when both the London and New York stock markets are closed. Although forex trading continues the volume is much lower and there is potential for dramatic price changes, though rare.
Entering a long position is done at the ask price, entering a short position is done at the bid price. The ask price is always higher than the bid and the difference between the two is the spread. Its like a retail situation - if you want to buy a shirt you will have to pay the shop the ask price: but they didn’t get that shirt at that same price, they paid less so they could put it in their window and sell it at a profit - they paid the bid price.
Let’s say for example that the spread from your broker on EUR/USD during the London/New York business hours is 1 pip. The only way to know what happens to their spread after NY closes is to watch the quotes. The spread is not visible on most charts: most charts are drawn from the bid price only. It would not be unusual to see the spread go from 1 pip to 10 or 15 or 20 pips “overnight”.
And the spread varies during this time to so it might spike out from 10 pips to 20 pips just for a few seconds. But that few seconds is enough for the broker’s system to execute any order that now falls within the spread. It could be an entry order or it could be a stop-loss order.
Its very easy to find you have had a buy order triggered overnight when price appears on the chart to have fallen all night. That’s because although the bid price did fall, the ask price was pushed higher by the broker, and the chart doesn’t show this. Same with stops: its very annoying to have a position closed because the stop-loss was close to the bid/ask range and then find that price continued to move in your position’s favour - if only it had been still live!!! Grrrr!
Stay up late a few times and watch quotes v’s charts.