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🤔 Is Spread plays a major role in net profit booking in Forex Trading?

Is Spread plays a major role in net profit booking in Forex Trading?


Is Spread plays a major role in net profit booking in Forex Trading? 🤔

Yes, Spread plays a major role in net profit booking in Forex Trading.

What is Spread?

Spread is the difference between the Ask (Buying Price) and Bid (Selling Price).

Spread = | Ask - Bid |


Why forex broker puts spread?

When we place any trade either Buy or Sell in Forex. we find that each trade opens in negative amount or loss, because of this spread.
This Spread is charged by Forex Broker for managing the expenses of Trading Platform and Trading Account Management.

Can I get Zero Spread Account?

Yes, you can open a Nearly Zero Spread Account with your Forex Broker. But in the case of a Zero Spread Account, you have to give a trading charge per lot size traded which is around $3 to $6 per 01 standard trading lot size.
There are also concepts of ECN (Electronic Communication Network) Accounts in which you find the lowest spread. But these accounts need a minimum $1000 deposit. The deposit amount may vary from broker to broker.

Floating vs Fixed Spread

Spread can be change with each tick of price change and market volatility this is called Floating Spread. But some brokers also provide Fixed Spread for most volatile currency pairs like EURUSD etc.
Forex Broker tries to generate more and more profit using spread. that's why they increase the spread in the session timings when currency is more volatile due to a large number of trades happening.

Thats' why always find regulated brokers with the minimum spread.

How does spread affect profits in trades?

There are 02 points. The first is very simple and easy to understand that if the spread is lowest then you can close the trade-in minimum movement (upside or downside) in profit. In other words, we can close the trade either in profit or at a minimum loss (in case of wrong trade).

The second point is tricky. When we put over TP (Take Profit) at a certain level and our TP falls between ASK and BID price and price return back from that level to the opposite direction. it may be possible we have to book loss in that trade due to spread. because if the spread is lowest the difference between ASK and BID is also low. then the change of surrounding our TP between ASK and BID price is less.

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Summary

Spread is the difference between ASK and BID Price which is charged by Forex Broker for maintaining Forex Account and managing expenses. Spread can be fixed or floating. We find the lowest spread in the ECN account but it requires a high initial deposit. Kindly choose Forex Broker wisely so that your profits do not affect due to High Spread.

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