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Cheadle
Posts: 1 since Mar 2019
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I have learnt that the bid/ask spread is one of the most important variables that new retail traders need to consider.
When I was a newbie trader I started off using 5 pip S/l and 10 pip T/P for a 2:1 risk/reward ratio, (as I suspect many new traders do). I wasn't very successful. So I did a deep analysis of the EURUSD M1 chart with a reliable Zig Zag indicator. I set it to 5 pips as the minimum leg size, which for me signified the kind of retracement I could deal with.
The results seem to suggest that most small swings were around 7 pips and the 10 pip legs were relatively rare in comparison. So, I started using a 10 pip stop loss and left the take profit open, so I could monitor the trade closely and decide when to get out if the trade had already hit a 7 pip loss or profit.
This resulted in an improvement, but still left me short of a profit. It was only then that I noticed the high bid/ask spreads I was trading against with that broker, so of course looked for a better broker.
Now, if you use MT5 you can download a free indicator, "Bid/Ask spread analysis in MetaTrader 5" in MQL5 Articles, which reports the true recent bid/ask values, not just the spread your broker declares it to be. It should be very informative for established as well as new traders.
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