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Spreads - how do they work
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justenv
Junior Member

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Posts: 5
Joined: Nov 2011
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06-21-2015 02:37 AM
Hi,
Always been unsure of this. How does spread work?
Below are just hypothetical numbers to make things easier.

If DAX is priced at 11000.
You can buy for 11005
You can sell for 10995

Does this mean the spread is 10 pips?

And with regard to setting a stop loss, do I need to factor this in?

Say I'm £1pp, stop loss of 20 points. I enter the trade long at 11000, so I'm instantly 5 points down due to spread yes?
If it goes down to 10980, will it hit my stop, or does it need to go to 10975 to account for the spread? Say I wanted to limit my losses to £20 for 20 points, do I have to factor in the spread or does it work out?

Never really been a problem as I usually trade tight spreads or 1-2 pips, but I've always wondered...

Thanks

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