FX spread explained

My current broker charges a 'commission' to trade EUR/USD on their demo acct. It amounts to 6 pips either side. Needless to say it will be hard to make money with those charges.

DBFX charge 2-3-pips and claim they only charge to enter not exit a trade. They explain the cost or the spread will show up as a 2-3 pip minus in my P/L as soon as I open a trade.

Forgive my naivety, but have they not already charged my 2-3 pips when I enter a trade if I buy the bid as I get filled at the ask, and if I sell the offer I get filled at the bid?

I can live with it, I just need to understand it correctly. Does this mean I just need to add the number of relevant pips to my loss and subtract them from my profit?

Many thanks

Ignore the spread once you're out of the trade. Just look at the price where you got in, and the price where you got out.

If you're talking about p+l while you're trading, does it really matter a pip or two either way?

GammaJammer said:

Ignore the spread once you're out of the trade. Just look at the price where you got in, and the price where you got out.

If you're talking about p+l while you're trading, does it really matter a pip or two either way?

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It depends on how your trade I had a system that was losing more than 1000 pips per year on spread(for 2 pips spread on EurUsd).

But yes - overall I agree as long as you do not trade 5 times per day! Now I also do not look at spread that much. If you trade for 100+ pips moves, spread is not a such a big problem.

I wasn't commenting on whether you can live with it or not, merely on how to account for it when working out your p+l, and the difference between realised and unrealised p+l

Thanks, I am daytrading

GammaJammer said:

I wasn't commenting on whether you can live with it or not, merely on how to account for it when working out your p+l, and the difference between realised and unrealised p+l

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for 20-80 pip moves and averaging about 15-20 trades a day, so spread is significant. I just cld not reconcile my P/L with what was expressed in the P/L on my demo acct, so I was concerned that I had not understand how the FX broker gets paid. I get it now. Thanks.

coreed said:

for 20-80 pip moves and averaging about 15-20 trades a day, so spread is significant. I just cld not reconcile my P/L with what was expressed in the P/L on my demo acct, so I was concerned that I had not understand how the FX broker gets paid. I get it now. Thanks.

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Like I said, once you just look at the price where you got in and out it should all match up 100% (assuming you aren't paying fixed comission as well as spread)