Understanding the Spread

Beginner Questions
1

Hi, first post.

I’ve been reading alot but I still don’t have a full understanding on what a Spread means to me/us, Is a bigger or shorter spread better us?

And when im trading a currency(Oanda FXGame), is the reason my Pip/profit is initially in the negative because of the Spread?

Thanks. :slight_smile:

2

its the difference between what you pay to buy or sell a currency pair. Right now on Oanda GU is quoted at 1.9980/1.9983. So if I was to buy from the broker it would cost me 1.9983 but if I wanted to sell back I would only get 1.9980. The narrower the spread the better but on some platforms you also pay commission so you have to watch this to

3

I see, that’s what I thought, so the Spread is the brokers fee?

4

Its the brokers fee if they are trading against you or partly the brokers fee and the spread on the real market if they are laying the trade off onto the ECN network

5

The babypips.com school has a section that reads that you pay the spread only once. If you go long, you pay when you enter the position. If you go short, you pay when you leave the position.

If that is true, then following should also be true:

  1. A spread is created by moving the the ASK price, leaving the BID price at true market value. Which would support the following two examples:
    a) If you hold a long position, and a news release causes the spreads to increase, your p/l will not change because you have already paid the spread.
    b) If you hold a short position, and a news release causes the spreads to increase, your p/l will change because you have not already paid the spread.

If anyone can further confirm or give more information on this, please chime in.