ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

What is the spread in the currency market?

Updated on February 7, 2011

Many currency traders ask learners which is spread in the foreign exchange market.Despite the lack of habituation of this word with beginners, is an easy concept.However it is also very important in the business of foreign exchange and gains or losses resulting from the propagation of currency pairs. 

Definition 

Spread in the forex market is a difference between the cost at which you can buy a currency pair of the market (supply) and the cost, you can sell a currency pair to the market (demand). That is why it is often called spread supply and demand. The bid price is always a little greater than the cost of demand, resulting in a slight loss when opening your position in the foreign exchange market, which is the same size as the spread. This is why it is so important to learn the concept of the spread in the foreign exchange market brokers find the smallest possible spread. 

Sample Spread 

Spread of GBP / USD with 5 digit price: Supply is 1.4102, the demand is 1.4100, 1.4102 Spread is - 1.4100 = 0.0002 or 2 pips. 

Spread of NZD / USD with 5 digit price: Supply is 134.17, the demand is 134.11, Spread is 134.17 - 134.11 = 0.06 or 6 pips. 

Spread GBP / USD with the price of 6 digits is 1.41023 Supply, Demand is 1.41004, Spread is 1.41023 - 1.41004 = 0.0019 or 19 pips fractional pips or 1.9 normal. 

Spread GBP / USD with the price of 6 digits: the Bid is 86,782, the demand is 86,770, Spread is 86,782 to 86,770 = 0.012 or 12 pips fractional pips or 1.2 normal. 

How to use your knowledge of Spread in the forex market? 

Rating when you open a negotiating position in an e-Buy what you make on an offer price and when you sell it at prices of Claim, you should always consider your spreads when you make your business tactics in the foreign exchange market. For example, your system tells you to use 20 levels of pips Stop Loss (DP) and 50 levels of pips in profit taking (TG). There are two ways to do it: 

1. You can add value to your level open TG (subtract for short positions) and subtracting the DP of the same level (adding to short positions). In this way they preserved the values and the ratio of profit / loss but increases the likelihood that your stop loss is reached and reduces the chance of getting your take profit. 

2. Alternately, in addition to the actions listed above, you can subtract the spread of your TG (add propagation for short positions) and add spread to your DP (subtract for short positions). This will protect the likelihood of achieving the levels of the arrest of loss or take profit levels but decrease your income in case of 'take profit' and increase your losses in case of 'Stop Loss'. 

As you see, both strategies have their own drawbacks, so you should care about your particular system to be suitably employed Spread your knowledge in the forex market when using the position size calculator.

Comments

    0 of 8192 characters used
    Post Comment

    No comments yet.

    working

    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, hubpages.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: https://hubpages.com/privacy-policy#gdpr

    Show Details
    Necessary
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
    Features
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Marketing
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Statistics
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)