The spread and the points in forex trading

The spread and the points in forex trading

Points gap between supply and demand (the spread)

For example, in the exchange rate of EUR / USD was 1.4503 / 1.4500

This will read verbally without the first three digits of the three as follows 03/00

If the difference here was only 3 points, these 3 points are taxi mediator on the size of the deal.

Remember an important point here pay Spread the type of relationship deal to buy or sell ..

When you buy a currency you will pay teams spread between the two currencies because you pay the difference until you open the package and enter the market, and do not pay anything when you go out, but when you sell the currency you will not pay spread between the two currencies when you open the transaction but will pay this spread when you want to close the deal and get out of the market.

Spread the brokerage firms

* Note: companies seek mediation to provide differences spreads competitive narrow, but there are cases where you may spreads to widen beyond the typical spreads according to market conditions especially at the news, and get brokerage firms currency rates directly through its relationship banking with

the largest banks and financial institutions in the world of price providers.

Most brokerage firms offer spreads difference of 2 to 4 points in the major currency pairs and this cost represents about 0.025% of the cost of the deal unlike stock markets that may cost 0.125% five-fold.

Try to choose a brokerage firm that was spread this average difference and choose companies that offer variable spreads considerably in response to market volatility with the knowledge that the spread is not everything in the selection of companies.

The relationship between the spread and the cost of the deal:

The formula to calculate the cost of the transaction in accordance with the Spread

Transaction cost = ischial price - Price Alipid = points difference (spread)

For example, in the exchange rate pair USD / JPY was 119.82 / 119.80

If the cost of the deal here is only 2 points, 3 points are taxi mediator of the size of the deal.

Because 11982 - 11980 = 2 points difference between the bid and ask price