how do i calculate spread commissions for forex broker.

@4u2enjoy (300)
Malaysia
June 4, 2009 7:28am CST
hye, just want to ask about spread. if the broker stated that the spread is 3 pips for gbp/usd. is it for every trade i make there will be a spread 3 pips for the broker ; example : if the buying price is 1.004 then i will be buying for actually 1.007? when does the spread commission will be taken out from my account? help me please.
1 response
@oudine2 (147)
• Argentina
4 Jun 09
The spread is not a comission, is the difference between the buying price and the selling price. If the price at a certain time is: 1.4120/1.4122 (the spread is 3 pips, or 0.0003 If you go short (sell), the price you will be getting, is 1.4120, if you go long (buy) you are getting the price of 1.4122. So if you instantly you want to close your trade, you will have to pay the other price, for buying or selling, depending if you were short or long. So you only have to "pay" once this comission, eventhough it is not a comission, it´s just the difference between the buy and sell price. For a better example, EUR/USD is 1.4120/1.4122 You think that the EUR will be stronger than the USD, so you buy EUR, you buy let´s say, 10000 euros, so you will have to pay 10000*1.4122, that´s 14120 dollars (if you have a 100:1 leverage you will only need 141 dollars to do this trade). Ok, as you thought, the euro is going better, now the quotes say: 1.4200/1.4202, so you want to close the trade, you are going to sell the 10000 euros you bought, you are going to sell them at the other price, so 1.4202 You sell them for 14202 dollars, the profit is 14202-14120, you are winning 82 dollars, the price moved 82 pips
@oudine2 (147)
• Argentina
4 Jun 09
I messed up myself with the prices I think. Just to be a bit simpler, you buy at the expensive price and you sell at the cheapest price, when you enter a position you enter loosing 2 pips, if the position is of 10000 dollars you enter loosing 2 dollars, and each pip that moves is 1 dollars up or down (that´s why you shouldn´t use a high leverage. a position of 100 dollars, each pip is 1 cent 1000 dollars 10 cents etc... In other pairs or commodities, the spread is different, for example, if you are trading silver, the price es 15.50/15.53, so if you trade 1 unit, you start loosing 3 cents, if the price rises to 16.53/16.56 you earn 50 cents, if you are trading 2 units you have to double the values, etc. If you want 5 dollars for trading free, check my profile, you can trade some commodities in that broker, forex (all major currencies) and indexes. Good luck and happy trading!
@4u2enjoy (300)
• Malaysia
5 Jun 09
Thanks for all the info oudine2 and all of it are useful to me. I would like to learn more about forex through you. Can i add you in msn or yahoo messenger?