Someone help with how the spread actually works?

Beginner Questions Candlesticks, Chart Patterns, and Price Action
1

I am using a Forex.com practice account to learn to trade. I am super confused as to how the spread actually works.

Forex.com advertises they have a 5.9 pip spread for the EUR/USD

However, I noticed last night and just a few moments ago when I put in a trade that I am starting at least -14 pips in the hole

I placed a sell at 1.16536 in MT4, the price right after dropped to 1.16521. This was in my calculation 15 pips of movement. Now if the spread was only 6 pips, couldn’t I have closed the trade with a profit of 9 pips?

Instead of closing the trade I left it open and the price has now moved back up to 1.16548, my entry was 1.16536. This is a difference of 12 pips, if its a 5.9 pip spread I should be -18 pips. Instead I am seeing I am down 30 pips.

I could just be entirely wrong and confusing points with pips. On an old platform I once called GTSPRO the spread was literally just what it said, and it made trading pretty simple. If this is accurate and I’m going to need a trade to move 15 pips in my direction before I can begin to make money, I have no clue how I could make money of this. Could someone please help me out with this?

edit The price has now moved down to 1.16514 and its showing me that I am just now breaking even… How in the world could a trade I placed at 1.16536 be just breaking even at 1.16514?

2

I think you are confusing points and pips. Pips are the 4th number after the decimal, and the 5th number is a partial pip or pipette I think is the term. So I am seeing only 1.5 pips of movement in your first calculation.

2 Likes
3

Hi @dupue

Please tell us where you saw such an advertisement. While varying market conditions can cause spreads to widen at times, our typical EUR/USD spread is 1.3 pips. We post both the live and typical spreads for all currency pairs we offer http://on.forex.com/spreads

As @jseymour84 pointed out, the fifth digit to the right of the decimal represents one-tenth of one pip. You might have misread 1.4 pips to be 14 pips. Please post a screenshot of your practice trade, if you still have questions about it, so we can see the details.

4

I see what you are saying now, and thanks for your fast response. I am also seeing the spread as 2.4 now.

2 Likes
5

Thanks for getting back to us @dupue. We’re glad that’s resolved. If you have more questions about FOREX.com, please don’t hesitate to reach out to us in the Broker Support section of BabyPips.

You’re looking at the spreads around 5pm New York Time which is when daily trade rollover occurs. This marks the end of one trading day and the start of the next in the 24-hour global forex market. It tends to be a quiet time with little trading, which is why you see wider spreads. When market activity picks up as the new business day begins in Asia, you will see the spreads tighten.

Also, keep in mind FOREX.com spreads are all inclusive, with no additional commissions charged. Some brokers charge a commission on top of their spreads, so you must factor that in when computing your total transaction costs.