RE: Forex Bid/Ask spread clarification
Mike Bryant
The user’s guide explains what it is and how it’s used in Builder (Symbols and Settings, Symbol Library, Symbol Settings):
The bid/ask spread is the difference between the current price buyers are willing to purchase the instrument for and the price sellers are willing to sell it for. The bid is the lower price, whereas the ask is the higher price. Buy orders are always filled at the ask, and sell orders are always filled at the bid. A price chart displays the bid price only. In Builder, the bid/ask spread is only used if the Order Fill Rule option on the Evaluation menu ("Use Bid/Ask spread to determine fills") is checked. If so, market buy orders will be filled above the apparent market price (based on the chart), whereas market sell orders will be filled at the price seen on the chart. The bid/ask spread is part of the cost of the trade.
The bid/ask spread is intended for forex trading and is not typically used for trading futures. When developing forex strategies for MetaTrader 4, this option should be used because MetaTrader 4 uses the bid/ask spread when evaluating strategies. This is consistent with the common practice in forex trading of paying for the trade through the spread rather than paying the broker a fixed commission.
If the bid/ask option is selected, Builder also uses the bid/ask spread to determine if a pending order is filled. For example, a buy stop order is only filled if the ask price, which is above the chart price (bid), touches the stop price. If, for example, the price bar on the chart just touches the stop price, it may appear that the order should be filled, but Builder won't show the historical trade as filled unless the ask price reached the buy stop price. Similarly, a buy limit order will not be recorded as filled unless the ask price reaches down to the buy limit price. Sell stops and limits are filled at the bid, so, unlike buy orders, their fill prices directly correspond to the chart prices. This is also how MetaTrader 4 determines fills.
Mike Bryant
Adaptrade Software
From: adaptrad...@googlegroups.com <adaptrad...@googlegroups.com> On Behalf Of Michael W
Sent: Wednesday, November 16, 2022 10:27 AM
Subject: Forex Bid/Ask spread clarification
I was just wondering if the bid/ask spread is calculated per overall trade (opening and exit taken together) or per side? So when using the bid/ask spread for forex in Builder, should the value set for each symbol be twice the average spread for the symbol, similar to how the trading costs are calculated for the total trade? Because in the Trade List reports I'm noticing that the spread doesn't seem to be applied to the entry price, but is only being added to the exit. So for example, if I'm typically seeing a 10 pip spread for a pair from my broker, I should use 20 pips as the spread value in Builder?
