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Do you prefer fixed spreads or dynamic spreads?
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TheLastBear

Member Since Jul 03, 2012  186 posts TheLastBear Aug 27 2012 at 07:53
Hey guys,

do you prefer fixed spreads or do you prefer dynamic spreads? What does your broker offer you?

Thanks for taking time to respond.

Pax puts the X in Forex.
stevewalker

Member Since Jun 06, 2012  1439 posts stevewalker (stevewalker) Aug 27 2012 at 09:00
ECN Account
- slippage + Comission + var Spread

it is better to trade with
- 4 digit or 5 digit fix spread NDD broker

variable spread is a big trap for EA s to fail.

better to trade with fix spread. ( 4-5 weeks ago I was on the other side )

walker

Trade the Trend, Defend to Price!
malkaby85

Member Since Aug 17, 2012  10 posts malkaby85 Aug 27 2012 at 11:13
fix spread of course grin

MRodrigez

Member Since Jan 31, 2012  151 posts Moreno Rodrigez (MRodrigez) Aug 28 2012 at 07:11
malkaby85 posted:
fix spread of course grin


it all depends on the trading strategy you are using

James_Bond

Member Since Jan 14, 2010  556 posts James_Bond Aug 28 2012 at 14:49 (edited Aug 28 2012 at 14:50 )
TheLastBear posted:
Hey guys,

do you prefer fixed spreads or do you prefer dynamic spreads? What does your broker offer you?

Thanks for taking time to respond.


A great question. I was sure dynamic spreads are best, until I read walker's response.

I do think fixed spreads is the more transparent approach broker's wise, as many traders overlook or don't understand the commission factor. However, with most brokers changing their model from fixed to variable+commission model, the costs per trade went straight down. By my calculations, spreads with a commission model are cheaper than fixed spreads.

For example (please correct me if I'm wrong), if a commission is $2.5 per 1 lot per turn, and the initial spread is 0.5, then openning and closing a trade of 1 lot would cost 0.5pip*2+($2.5*2) = $5*2 + $5 = $15 or 1.5 pips. Divided by 2, this makes a spread of 0.75 only. Anything above that number with a fixed spread is more expensive (fixed spread usually start from 1.5 pips).

stevewalker

Member Since Jun 06, 2012  1439 posts stevewalker (stevewalker) Aug 28 2012 at 15:02 (edited Aug 28 2012 at 15:02 )
one Q
one input

why you divided it by 2 ?
calculate slippage %90 negative and starting from 0.5 to >5 pips sometimes

on the other hand variable spread is a big trap for fail EA s. EA s programmed for doing always the same. when EA work with variable spread broker it has much more fail poss then working with fix spread.

walker


James_Bond posted:
TheLastBear posted:
Hey guys,

do you prefer fixed spreads or do you prefer dynamic spreads? What does your broker offer you?

Thanks for taking time to respond.


A great question. I was sure dynamic spreads are best, until I read walker's response.

I do think fixed spreads is the more transparent approach broker's wise, as many traders overlook or don't understand the commission factor. However, with most brokers changing their model from fixed to variable+commission model, the costs per trade went straight down. By my calculations, spreads with a commission model are cheaper than fixed spreads.

For example (please correct me if I'm wrong), if a commission is $2.5 per 1 lot per turn, and the initial spread is 0.5, then openning and closing a trade of 1 lot would cost 0.5pip*2+($2.5*2) = $5*2 + $5 = $15 or 1.5 pips. Divided by 2, this makes a spread of 0.75 only. Anything above that number with a fixed spread is more expensive (fixed spread usually start from 1.5 pips).

Trade the Trend, Defend to Price!
James_Bond

Member Since Jan 14, 2010  556 posts James_Bond Aug 29 2012 at 12:22
stevewalker posted:
one Q
one input

why you divided it by 2 ?


Because a the spread is for one way trade, ie buy. If you wish to close it (ie sell), that is another spread cost. Actually, I could have counted it for one way only, instead of counting round trip and then dividing it roll.

As to slippage - I'm assuming it is the same for fixed and variable, or am I wrong here?

TheLastBear

Member Since Jul 03, 2012  186 posts TheLastBear Aug 29 2012 at 12:39
I have to agree with Moreno Rodrigez, it all depends on your trading strategy. While EA's may under-perform with dynamic spreads, active traders may not. I am not a fan of EA's so that would not account. I myself have not decided if I would prefer a fixed spread over a dynamic spread.

Pax puts the X in Forex.
stevewalker

Member Since Jun 06, 2012  1439 posts stevewalker (stevewalker) Aug 29 2012 at 14:08
we are calculating the cost.

according to my calculations, including slippage, fix spread is better then variable spread.
bigger the spread smaller the slippage

also with most of the brokers trader can limit slippage with instant order execution.

with ECN market order execution trade can slip as much as it can sometimes > 30 pips.

also variable spread is another ( name on it ) variable that trader can not control.

every variable out of trader control runs against trader

walker


James_Bond posted:
stevewalker posted:
one Q
one input

why you divided it by 2 ?


Because a the spread is for one way trade, ie buy. If you wish to close it (ie sell), that is another spread cost. Actually, I could have counted it for one way only, instead of counting round trip and then dividing it roll.

As to slippage - I'm assuming it is the same for fixed and variable, or am I wrong here?

Trade the Trend, Defend to Price!
James_Bond

Member Since Jan 14, 2010  556 posts James_Bond Aug 29 2012 at 14:47
stevewalker posted:
bigger the spread smaller the slippage



I think this is not a plus but a minus - most of the cost is built into the high spread - since the large part of slippage occurs (or should at least) during an economic event and since most of the time there aren't any events, the trader keeps paying a high spread for his trades.

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