The problem of spread and flat markets.

It would be so nice, wouldn’t it if we could start from 0.

New traders often don’t realise that every trade they place comes with  a price, the spread, this means you will NEVER enter a trade in profit, for example, if your spread is 2 pips, it means that you have to do 2 pips profit BEFORE you get to take any money.

Thus, if you have 10 trades, you need to make 20 pips before those 10 trades are profitable. (note that spread differs between currency pairs, GBP is normally the most expensive).

To make things MORE difficult, the spread changes based on the movement in the market. Only by a small amount but it is worth noting that it DOES change.

Spread and Emotions

The problem with spread, is that it affects your emotions when trading. Always starting trades negative, if you don’t understand what spread is can be quite off-putting. When in fact it’s just part of trading. Part of the blessings of trading with a robot is that the robot has no emotions. So spread, or starting in a loss it doesn’t care about.

Does it matter?

When you understand it, not really, but brokers with terrible spread will make it harder to make profit if you are trying to take smaller pips, you want 10 pips, but you have to get 12.

When STRobot opens a basket of trades over a few hours, they can hang around the spread, today is an example, the markets are slow, we end up with 10 trades on just sitting still, hovering in a range of 10 pips. We know WHAT it should be doing but it just isn’t.

All you can do is wait for some volatility or participation in the market, when there is no news, this fuels this kind of market, added to that is if there is important news in the next 24 hours. The markets will go into the doldrums while they wait.

Happy trading!

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