Meaning, the Bid price (1.0000) needs to move 15 pips above to take profit and needs to move 5 pips below to exit with a loss, is this statement correct?
Meaning, the Ask price (1.0005) needs to move 10 pips above to exit with a loss and needs to move 30 pips below to take profit, is this statement correct?
I would be gratefull if you explain wth further examples. Thanks in advance,
Husain
There is no single price or “market price” for a pair. Each pair is quoted with two prices, Bid (to sell) and Ask (to buy).
But charts usually show only the bid price, and to buy that pair you need to allow for the spread added to the bid to make the ask.
To make 10 pips profit from a long position, you need the bid to rise by the spread, 5 pips, plus the TP distance, 10 pips = 15 pips. To ensure your loss is no more than 10 pips, set the SL at the bid price minus 10 pips.
Thanks for your reply. Does that mean (in your example) that if I put SL = 10 pips while spread = 5 then I will get out from the trade after I lose 5 pips only, am I right?
When setting an exit order, you must allow for the spread too. If you set your SL 10 pips from the current bid price this will be 15 pips below the current ask price: therefore if you want to restrict your loss to a maximum of 10 pips, you must set your SL 5 pips below the bid.