Lets say i go long EUR/USD and i make 50 pips and i leave the trade open.
So it stays at 50 then goes a little higher. Then it comes down to 40 and just stays in that range…30-50 range. Can i close this trade out and make the pips and then go long on the same pair and see about getting another 30-40 pips? Since it wasn’t going over 50 my thought was-why not close it, open it again and make some more pips. thanks for any help
Sure you could opt out of the pair and re-up with a new trade. The problem here is that you are going to be paying the spread again. A better choice would be to have a stop loss order. If you make this trade with a market order then you need to sit and watch it to make sure it doesn’t go against you and you lose a ton. In your example, if you have initiated the trade as a stop loss order then you could move your initial stop loss to the new level (initial price plus 30 pips). This way you keep the 30 pip profit and if the market goes against you then you would be stopped out with the 30 pips you already made.
There are also orders that have trailing stop losses. In those you can specify that as the price moves your stop loss moves with you. Example, say you go long on EUR/USD at 1.4880 and have a 15 pip trailing stop loss (so your stop is at 1.4865). If the market makes it to 1.4895, now your stop loss is at 1.4880. Say the trend continues and now the market is at 1.4910, then your stop loss is at 1.4895. This trailing stop loss is a good way to set a trade and forget it for a bit while you follow other things. The only issue with this is if you are trading over longer periods of time the swings tend to be bigger and you need to make you stop losses bigger as well.
Thanks Kramster for your help. I still have not grasped the idea of paying the spread. So if i place alot of trades everyday i will be paying the spread on every trade? How do i calculate that? Will it be alot for each trade? thanks
Hey Ozzy007
I think if you set up a demo account somewhere you will get the idea. Essentially it goes like this. Everytime you make a complete transaction (buy then sell, or sell then buy) you will pay the dealer for his work. The way they get paid is the spread. On your demo account you will see 2 prices for each currency pair. One for Buy one for Sell. Say your going long so your going to buy the base currency. You look at the price spread and it says 108.80 108.83. Since your going to buy you would pay the 108.83… Now suppose the market does nothing for the rest of the day and you are going to get out at the end of the session. When you look at the prices to get out you see the same prices (108.80 108.83). Now when you sell your pair they will only give you 108.80 for it. So you have paid them 3 pips to do this trade. Generally speaking most pips are worth around $10 each, so you have paid them $30 for this trade. On the demo account I have when I go into a trade like this it shows me as having lost as soon as I make the buy because the market price for the pair would be the 108.80, so since I bought at 108.83 I was already down 3 pips.
I think you could get a great idea of how this all works if you head up to the school here. They have a good section on all this in the pre-school area. If you really want to get a good understanding of this stuff their school (School of Pipsology - - Beginner’s Guide to Forex Trading, Free Forex Education, Learn to Trade Forex, Forex Training - BabyPips.com) is a great place to start.