All language subtitles for [English (auto-generated)] What Are Spreads In Forex_ (EVERYTHING YOU NEED TO KNOW) [DownSub.com]

so spread

in currency markets is that thing that

when price

goes above your target you watch candles

literally touch

your target order but the market never

fills it

it's also even worse that thing that

when price

doesn't even touch your stop-loss you

still get stopped out even though there

wasn't a candlestick

or a wick that actually touched your

stop-loss order

unfortunately you still got stopped out

i'm sure that's happened to you before

and that is all

because of spread and if you don't

understand it then there's no way for

you to fight against it which is why

in this video i'm going to be telling

you everything you need to know about

spread

to help you battle against it and kind

of incorporate

it with your trading there's no getting

around it but there are things we can do

so that it has less of an effect on the

outcome

of our trades so let's go ahead and dive

into today's video right

now so spread is what you see whenever

you pull up your order page right here

on the pound new zealand this is my

order form every market is going to

every uh

brokerage every platform will have one

of these and it will say

sell and give you a price you can sell

at it will also say buy

give you a price you can buy it or it

may say bid

which is sell and ask which is buy

so it's either gonna say sell and buy or

bid and ask bid to sell

ask is buy either way that's not

something that's super important what

you need to understand

is what that means is that this is the

exact price

you can buy this currency pair at right

now

while this is the exact price you can

sell it at

right now the difference between those

two prices

is called the spread you can see that in

the middle here i know it's tiny i'll

zoom in on it

and this spread is how brokerages make

money

this spread is kind of their fee that

they charge you to use their data to

actually place trades

using this brokerage and i expect it i

didn't have to build the platform that i

trade on

i understand that they need to charge a

spread sometimes i do think

it gets a little fishy and a little bit

too high but it is what it is

the main thing you need to understand is

what the spread is how it affects your

trades

and how you can prepare for spreads

while trading in the currency market so

let's dive into that now

right now on the screen you can see that

we have a four pip spread

on the pound new zealand what that means

we're diving into what

a spread actually means for your trading

when you're placing a trade

if the spread of the pound new zealand

right now is four pips and we have

the close of this candle that we want to

enter on that would mean we want to

enter

at 1.9345

let's say you place a buy trade and you

see something like this

you see the market fill you and once you

press buy this is where your order

actually is

this is where your buy order actually

happens is this black line

and you're sitting here going what the

hell that's not where i place my order

my order should be right here have you

ever had that happen before

if you have the reason this happens is

due to spread

the reason this happened is because you

weren't looking up here at the spread

which is currently four pips which means

if you place an

order at 1.9345 it will

fill you five excuse me four pips above

that which would be

1.9349 now

that's one thing that spread causes and

it sucks trust me

i can't stand when i get a fill in an

order without looking at the spread and

then

realize i should have looked at the

spread that does suck

but an even worse scenario is something

like this let's say we're involved in

this trade and let's say we got

the perfect entry whenever we place the

trade there was no spread

that'll never happen but let's just

pretend and then we see the trade moving

oh cool we got like halfway to the

target that's nice and then we see oh we

almost hit our target right there that

is incredible i'm super excited super

excited

boom you all of a sudden get stopped out

but

you know why because here's your stop

loss

why would you be stopped out when

there's this much room between price and

your stop i can literally

see space why did i get stopped out why

did i lose money on this trade

i know i've been there especially the

beginning of my career when i didn't

understand spread i got frustrated about

this situation

god knows how many times so the reason

you were stopped out on this trade is

because

remember that four pip spread where did

price go

at its lowest lowest price i'll put a

line on the chart just to make this

super simple for you guys

lowest price i'm gonna put in blue is

right here

so if that's the lowest price and this

is our stop loss

and our order got triggered why did it

get triggered again remember that four

pip stop loss

from the lowest price down to an actual

stop loss you have placed with a limit

order

is only two pips 1.9 right at two pips

therefore price with your spread

actually went two pips below your stop

loss

which is why you got stopped out on this

trade

and i know it sucks but this is just a

part of trading we're gonna go over some

things you can use

in order to prepare for it and hopefully

keep it from being

such an issue a little bit later on in

the video but

one more scenario we're going to go over

really quickly before we do that

is let's say that this magically didn't

stop you out

and instead you get to watch and let's

say this didn't stop you out either

even though we got right there at it for

this example that's what we're gonna say

because this gives me a good opportunity

to show you

this scenario as well here you go

oh my gosh yes profit i didn't get

stopped

out all through here and now price went

above

my profit what's bad for me is i would

wake up in the mornings

after placing a trade at night and see

this and then

price would do something like this and i

would see a negative number

in my account and go what in the l how

did i lose this trade when price clearly

hit my target have you ever been leave a

comment below if you've ever been there

and ever thought that so let's put a

horizontal line a green one on the chart

this is where you have your limit order

so right here at this green line

we can see now we have to remember yet

again

maybe at the time that this order was

hit by price

the spread was the same for pips let's

say it was

if that's the case then where does the

market really need to go to hit your

four pips

i mean to hit your uh your actual target

if we're at 1.9351 then we would need to

be at 1.9355

so that means your actual

target would have needed to be up here

we'll do that in blue as well

so this is where price would have needed

to make it to in order to actually fill

your trade

because of that four pip spread now this

is the case no matter what the spread is

and there are variations of the spread

depending on the currency pair you trade

the time of day it is a lot of different

factors go into it which is what we're

going to dive into now

hopefully now though you do have an

understanding of what spread

is and if you do and you didn't before

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welcome back forgot to do all of that

at the beginning of the video but let's

dive into some of the ways that we can

keep this from affecting our trading

in a major way there's no way to

completely exclude spreads

there's a way to get really close and

that's called paying commissions

which we'll talk about later on but

right now let's talk about some ways

other than paying commissions that can

keep you from having this affect your

trading

in a highly negative way the first thing

is time frame

this is the reason that i have such a

problem with people telling beginners

that they should day trade because this

is something that most beginners don't

really understand some

intermediate traders don't even

understand this and if you're starting

out

trying to trade on the five minute chart

not understanding what spread is then

this is going to happen to you

over and over and you're constantly

going to have questions going

why did i get stopped out of this trade

why didn't this trade hit my targets

whereas if you were on a let's say

four hour chart let's talk about the

difference here let's say you wanted to

do the same exact thing

on this chart that we did on the

five-minute chart let's say you want to

buy right here where price is

at 1.3 excuse me 1.9345

but again you have that four pip spread

so instead of

four or five it would be at four eight

now look how much smaller this looks

compared to all the candles the four

hour chart is going to move

a lot more if you placed a trade at our

black line right here

and got filled with the blue line would

that affect your trade as much as it

would

on a smaller time frame no and what i

mean by that is on a smaller time frame

like a five minute chart

you may be looking for 15 maybe 20 pips

max for your target maybe actually

most of the time maybe lower maybe like

10 pips if you're looking for 10 pips

for a profit

and your spread takes you out of four of

them

then there's very little likelihood

you're gonna hit that whereas on a four

hour chart your profit

is probably gonna be somewhere between

40 and up to

hundreds of pips so with this being the

case that three pips

doesn't matter nearly as much so the

first way we can keep the spread

in the currency market from affecting us

so much in our trading

is by trading higher time frames where

our targets are much

bigger now i know that's not super

attractive to a lot of people because

they want to day trades they can make

money fast but what i

would suggest is always keep day trading

as something you can do but start with

swing trading

so you get the hang of everything start

with swing trading practice here

until you're actually profitable swing

trading because if you're not profitable

on higher time frames if you're not

capable of actually becoming profitable

there

then you're not going to be profitable

day trading either so really what i'm

preaching here

is patience patience in your trading

journey be sure you can be profitable in

higher time frames

get to know your your brokerage your

platform how to do trades get to know

spread get to understand your system

better on higher time frames

then you can decide whether or not you

want to drop down to those smaller time

frames but please do not start

on small time frames especially if you

didn't even know what spread was or

understand how it worked before this

video

now what are a couple of other ways we

can do this well as i said earlier

time frames time of day can affect it

but before we talk about time of day

let's talk about currency pairs the

pound new zealand by far has one of the

highest

spreads that's why i wanted to use this

as an example because it's an extreme

scenario if we go to the euro dollar

right now for instance you can see

that we only have a one pip spread so

one of the ways

if you said stephen i'm not listening to

you i'm not going to swing trade i want

to go down

on smaller time frames right now well if

you do

one of the things you could do in order

to

keep the spread from affecting your

trades so much

is only trade currency pairs that have a

very low spread

the top five major pairs normally have

very low spreads and this is a

generalization

not always during high impact news

events spreads go crazy at 5 p.m

every eastern standard time that's where

i'm at is in atlanta at 5 pm eastern

standard time

spreads go crazy everywhere so this is

just a generalization

but generally the top five major pairs

which are the euro dollar

the pound dollar you can look at the

spread while i do this the spreads right

here

the pound dollar the dollar yen the

aussie dollar

and the dollar swiss essentially

normally will have

pretty small spreads so that's the

second way you can kind of account for

spreads in your trading

and keep it from messing your trades up

too bad is a trade pairs with very

small spreads next is time of day

you want to be trading away from times

like 5 p.m and 5 p.m is really

i've seen spreads really low right now

it's 2 30 a.m

and since it was probably

somewhere near 10 p.m spreads have been

super low unlike the euro dollar and

other major currency pairs

so really the only time you want to

avoid

i guess you could say is something like

between 4 p.m

and somewhere near 9 00 pm

those times i would completely avoid

trading especially on lower time frames

because spreads are going to be a bit

higher than usual during those times

after that at least from my experience

do your own research check it out

watch the spreads during whatever times

you plan to trade to make sure they

don't just go crazy like they do at 5

p.m

but from my experience normally the the

harshest

spreads happen between 4 and 9 pm and

after that

and before 4 pm they're normally pretty

normal

actually so those are some ways that you

can keep spread from affecting your

trading so much

without paying commission but now let's

talk about how you can drastically

reduce the spread that you have

almost every brokerage and i'll throw uh

something on the screen here

while i talk to show you where where it

is on rwanda which is the brokerage i

use

on awanda they have a commission based

platform what a commission based

platform does

is instead of you paying the full fee to

trade with this brokerage to use their

their data and trade through them

instead of the full

fee being with the spread you actually

have an opportunity to pay

on a per trade basis i think awanda

charges ten dollars per

full standard lot that you trade but

this is in

and out so this is something that i

would never suggest

to someone with a small account because

the amount of money you're gonna be

making

let's just picture this for a second

let's say you have a thousand dollar

account

and you want to trade a trade with a

full standard lot and you have a 50

risk on that trade well if you're

trading with a commission based account

the reason i tell people to shy away

from this if they have smaller accounts

is because the spread may not affect you

too bad

but if you're trading with a fifty

dollar risk on a thousand dollar account

you're already risking five percent of

your account

and then you add ten dollars to that for

the entry

and then you add another ten dollars

because it's in and out for the exit you

pay another ten dollars when you exit

the trade

and let's say you lose the trade now

instead of losing fifty dollars you've

lost seventy dollars

because you're paying commission so

until you get to a point where you are

consistently profitable over a long

period of time and

you just want a commission-based account

because you have a pretty large

account size and it you you can tell

you'll be so experienced at that point

that you'll know if a commission-based

account

is right for you or not so what i'm

telling you now is i would probably shy

away from a commission based account

even though it does help you with

spreads it's going to cost you money and

with a small account

it's a cost you really can't afford to

lose at this exact moment

so that's my spill on spreads hopefully

it helps you to learn and understand

exactly what they are

and how you can minimize the effect the

negative effect

that they have on your trading i hope

you enjoyed it if you did

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watching if you watch the full video

leave me a comment that is awesome i

really do appreciate it and

i'll talk to you guys in the next video

see y'all soon