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Bid Ask Spread Explained - Specifications in Meta Trader - YouTube
Channel: Petko Aleksandrov
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Dear students, we continue now with the
market watch. Normally it is on the left
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side and you see here all the trading
assets that you can trade with your
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broker. When you install the Meta Trader
initially you will not see too many
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assets. So, what you need to do, is you
right click over any of the assets and
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you select show all. So, this way I see
all assets provided by this broker. Now,
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if I go to the top, normally are the
currencies, normally is the Forex market.
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All right? Below you can see some indexes, then we have some stocks and you will
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see some commodities, futures
cryptocurrencies, it really depends what
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your broker provides as trading assets.
But normally the huge, the regulated
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brokers are providing hundreds of assets
and the competition between the brokers
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brings them to the point where they want
to provide more and more assets and on a
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lower spread. Now what is the spread, guys? The spread is this third column that you
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see here and this is the difference
between the bid and the ask price. So, it
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is the very same thing like if you go to
the exchange bureau to exchange some
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currency if you go for a vacation or for
a holiday and you want to exchange your
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currency with the currency of the
country where you are going. And what you
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see in the exchange bureau is that there
is difference between the bid and the
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ask price or normally there they say the
buy and the sell. So, the difference in
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the exchange bureaus obviously is much
bigger than the one over here because
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here is very, very small, guys. So, if you
see EURUSD 1.1870 and
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on the exchange bureau you will see
there are 2-3 sands or even bigger
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difference, so it's possible that the buy
price for example will be 1.1875
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and the sale price will be
1.1870. It could be even
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much, much bigger depending on the
currencies that you're exchanging but
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here the difference is few points. So, you
see the EURUSD price at the current
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moment is 1.1870 and there
is one last digit that we call point. All
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right? And with the regulated brokers,
with the huge brokers the difference
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between the ask and the bid price
within this last fifth digit which is
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the point. So, it's a very, very small
spread and this is of course very good
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when you are trading with Expert
Advisors because you will have many
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trades opened and we don't want to pay a
spread. Actually, we don't pay the spread,
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everybody says pay spread, I use it also
but normally we don't pay the spread.
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Because when we buy an asset, when we buy EURUSD for example, we buy on the
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ask price. All right? And when we sell, we
sell on the bid price. So, the difference
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is the spread. We just buy at a little
bit higher price and we sell on the
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lower price. So for example, if I buy at
1.18716 and I close
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the position I will close it on the bid
price because when I close a buy
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obviously this is a sell. So, one more
time I buy on the ask price and I sell
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on the bid price. Also, when I buy on the
ask price and I close the position I
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will close it on the bid price. And the
same thing if I sell on the bid price
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and I close the position I will close it
on the ask price, on the higher price. So,
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basically this is how we pay the spread
when we execute the orders on the bid
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and the ask price. So, there is no physical
payment of the spread, you cannot see it
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anywhere here in the terminal which
I will explain you a little bit later.
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But simply we pay it because we buy on
the ask price and we sell on the bid
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price. And the recent years most of the
brokers are having five digits. So, after
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the point you see 1.1871 - 1.1872 and there is one
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more digit at the end. The third and the
fourth are the pips. So, you can see here
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1870, so 70 are the pips and
the last one is the point. And for
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example, if you buy at 1.1870 and you
close at 1.19, you will have 30 pips
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profit. And the JPY currencies, you can
see USDJPY below are having three
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digits after the point. So 04 are
the pips and the last one is the point.
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So for example, if you sell now on the bid
price and you close it on ask price
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109.000 you will benefit
these four pips. I hope this is clear,
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guys. Now, if you don't see this third
column and normally you will not see it
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when you install the Meta Trader you need to go right mouse and spread. So, if you
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don't see it, click right mouse and go to
spread, you will see it over here. And you
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can see the major currencies, what we
consider to be major currencies is the
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GBPUSD, EURUSD, USDJPY, USDCAD, AUDUSD, NZDUSD,
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AUDUSD, guys, is slang for Australian
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Dollar versus the American Dollar. There
are a couple of slang words, so for
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example GBPUSD is called to be the
Cable. EURUSD you can call it just
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Euro. USDJPY you can just call it the
Yen, the CAD, the Aussie, Aussie is
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Australian Dollar versus the American
Dollar and the New Zealand actually is
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called Kiwi this one over here.
All right? New Zealand versus the
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American Dollar. Sometimes you can hear or read in analysis, or traders, or mentors
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that they say Kiwi. So, the most traded
currencies are versus the American
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Dollar and they have lower spread. It's
essentially imported, guys, when we trade
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with Expert Advisors to have lower
spread to the minimum. OK?
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Small, small spread. Because the Expert
Advisors open many trades and when we
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have huge spread it can reflect actually
the result and it happens very often to
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me. With some of the courses I provide
Expert Advisors, I will provide Expert
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Advisors in this course as well, guys, so
you can practice and see how they work.
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But it happens very often that I have
been testing Expert Advisor and it shows
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good profit and students are writing me
back that they don't show good profit
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and more than 90% of the time
this is because they have very huge
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spread with their broker and finally the
result is negative instead of positive.
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So, this is about the market watch. If you
want to open any asset you just click
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right mouse and you go to chart window and it will open. I have actually now too
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many over here, so it will go to the end.
You can see there are small arrows and I
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can click to find it-this one over here
that open. You can see it came by default
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with some indicators. If you want to
remove right click, indicators list and
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you remove the indicators. So, you have
the pure chart over your screen at this
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case for the GBPUSD. OK, guys, so
this is the market watch. This is what we
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see the bid and the ask price, and the spread. One more time we buy on the ask price
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and we sell on the bid price. When we buy
on the ask price, we close the position
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on the bid price. And when we sell on the
bid price we close the position on the
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ask price. And the difference is the spread, this is where
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the broker benefits.OK? The broker will
benefit obviously this spread and this
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is inevitable of course for us. And when there is no volatility even
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sometimes for EURUSD with some of
the brokers you will see zero spread. But
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this is very rare, guys. You will see
normally small, small spread with a
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regulated broker and this is very
normal.
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OK? So, thank you for watching and I
will continue with the next lecture.
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Cheers
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