Spread Bid-Ask Usage Tips
A forex trader has its own consideration in choosing the broker you want to use. Includes the consideration of the spreads that cost to a trader. There are some tips on using bid-ask spreads or more precisely how to deal with spreads when trading forex.
Using order limit
There are some traders who choose to use pending order limit, by placing price level buy or sell a pair at one particular price, rather than using market order, that is according to current market price.
In fast moving market movements, the use of marker orders can result in higher or lower prices than the desired price. For example, if you want to buy at 1.12495 with current spread of 1.12500 / 1.12508, then you can place buy limit order at 1.12495. Once the Ask price touches 1.12495 then the buy limit is realized to buy. If you use market order (current price), then your buy level is at 1.12508 level.
Avoiding the cost of liquidity
The use of order limits also increases liquidity in the market. Sehigga allows you to avoid the liquidity costs incurred by most ECN (Electronic Communication Network) systems because it uses market liquidity, which arises when you use a market order to execute applicable bid-ask rates.
Percentage of spreads
Evaluate this spread more to the stock market, not the forex market. Spread bid-ask can be very significant if you use margin or leverage. Spread of 5 cents at stock price of $ 10 incl large percentage as compared to spread of 5 cents at stock price of $ 40.
Find the lowest or narrow spreads
For you retail traders in the forex market, it becomes impossible to get the 1 cent spread provided such as interbank and large financial institution institutions. Look for the lowest or narrow spreads of retail forex brokers that are devoted to retail traders to increase the chances of success in your trading.
Pay close attention to spreads as these include fees and may be hidden fees on forex trading. Large spreads can also erode trading profits and exacerbate losses.
With tips on using the above bid-ask spreads, you are expected to avoid unwanted spreads.