FX spread explained

[coreed]

My current broker charges a 'commission' to trade EUR/USD on their demo acct. It amounts to 6 pips either side. Needless to say it will be hard to make money with those charges.

DBFX charge 2-3-pips and claim they only charge to enter not exit a trade. They explain the cost or the spread will show up as a 2-3 pip minus in my P/L as soon as I open a trade.

Forgive my naivety, but have they not already charged my 2-3 pips when I enter a trade if I buy the bid as I get filled at the ask, and if I sell the offer I get filled at the bid?

I can live with it, I just need to understand it correctly. Does this mean I just need to add the number of relevant pips to my loss and subtract them from my profit?

Many thanks

 

[GammaJammer]

Ignore the spread once you're out of the trade. Just look at the price where you got in, and the price where you got out.

If you're talking about p+l while you're trading, does it really matter a pip or two either way?

 

[disi]

Ignore the spread once you're out of the trade. Just look at the price where you got in, and the price where you got out.

If you're talking about p+l while you're trading, does it really matter a pip or two either way?

It depends on how your trade I had a system that was losing more than 1000 pips per year on spread(for 2 pips spread on EurUsd).

But yes - overall I agree as long as you do not trade 5 times per day! Now I also do not look at spread that much. If you trade for 100+ pips moves, spread is not a such a big problem.

 

[GammaJammer]

I wasn't commenting on whether you can live with it or not, merely on how to account for it when working out your p+l, and the difference between realised and unrealised p+l

 

[coreed]

Thanks, I am daytrading

I wasn't commenting on whether you can live with it or not, merely on how to account for it when working out your p+l, and the difference between realised and unrealised p+l

for 20-80 pip moves and averaging about 15-20 trades a day, so spread is significant. I just cld not reconcile my P/L with what was expressed in the P/L on my demo acct, so I was concerned that I had not understand how the FX broker gets paid. I get it now. Thanks.

 

[GammaJammer]

for 20-80 pip moves and averaging about 15-20 trades a day, so spread is significant. I just cld not reconcile my P/L with what was expressed in the P/L on my demo acct, so I was concerned that I had not understand how the FX broker gets paid. I get it now. Thanks.

Like I said, once you just look at the price where you got in and out it should all match up 100% (assuming you aren't paying fixed comission as well as spread)