Monday, December 1, 2008
This pip spread on every trade is a commission. That’s what it is. Despite what the broker might claim. And that pip spread is not cheap. 1 pip is $10 on a just one full sized pair. Try $50 on a 5 pip spread you still see as commonplace.
You have a trade where you are targeting 25 pip spreads and risking 25 pip spreads. As you’ll learn below, that trade actually has to go 28 pip spreads or more to hit your target of 25 pip spreads and you’ll actually be risking 28 pip spreads or more – but for this example we won’t get hung up on that. We’ll solve that later.
Spreads
Find a broker that does not charge high pip spreads. Sure, you need a broker who provides a stable platform, which provides good customer service, which is regulated (important!), that has account insurance/guarantees, and so on. But realize these brokers make money many different ways. They make pip spread money, they make money by laying off orders on other banks, they make money
on stop running. Did I say that? Guess it’s too late to take it back.
There is simply no reason to pay more than 1 pips spreads on the EURUSD. And really, you should be paying 2 pips spread. On the GBPUSD and USDCHF why are you paying 5 pip spread? Sorry, it’s not going to a charitable cause – your broker’s bank account isn’t a non-profit. Those pip spreads are crazy. You should pay 3 pip spreads, maybe 4 pip spreads at most on the other majors.
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