BROKER SPREADS & TRADABLE CURRENCIES
Because of the nature of scalping (going for the smallest possible trade
typically using an initial stop of just 10 pips) you need to trade only on the
currency pairs with the smallest pip spread. Here is a screen shot taken of
FXCM’s spreads at the time of this writing (applicable to both mini and
regular trading accounts).
As you can see their fixed spreads range from 3 pips (on EUR/USD &
EUR/GBP) all the way up to 15 pips (on EUR/AUD & GBP/CHF).
It is best to stick with the currency pairs that are just 3 or 4 pips (I’ll explain
why shortly). Too bad that GBP/USD has a 5 pip spread as it is generally my
favorite currency pair to trade, but generally speaking it is best to stay away
from the pairs with 5 pip spreads, and absolutely don’t trade the higher spread
currency pairs.
Thus for the above mentioned reasons (at the time of this writing as brokers
may change spreads in the future) currently for FXCM the currency pairs that
are tradable with these scalping techniques are:
Why only trade these currency pairs? Allow me to explain. Later in this
eBook I will elaborate upon stops used in these trading methods, but I’ll
simply state here that generally you will initially be using 10 pip stops. What
this really means is that the market only has to move 10 pips less your spread
against you to get you stopped out. EUR/USD & EUR/GBP has a 3 pip
spread thus the market needs to only move 7 pips against your direction from
point of entry for you to lose your full 10 pips. Thus the odds of you scoring a
10 pip gain are actually 30% against you from the start. The other currency
pairs listed above have a 4 pip spread, thus the market needs only go 6 pips
against you on a 10 pip stop for you to lose out (40% against you from the
start). The currency pairs with a 5 pip spread can still be traded in special
circumstances, but in general it is best to shy away from these for what should
now be obvious reasons. All the other currency pairs with higher spreads are
absolutely not traded.
As you can see their fixed spreads range from 3 pips (on EUR/USD &
EUR/GBP) all the way up to 15 pips (on EUR/AUD & GBP/CHF).
It is best to stick with the currency pairs that are just 3 or 4 pips (I’ll explain
why shortly). Too bad that GBP/USD has a 5 pip spread as it is generally my
favorite currency pair to trade, but generally speaking it is best to stay away
from the pairs with 5 pip spreads, and absolutely don’t trade the higher spread
currency pairs.
Thus for the above mentioned reasons (at the time of this writing as brokers
may change spreads in the future) currently for FXCM the currency pairs that
are tradable with these scalping techniques are:
Why only trade these currency pairs? Allow me to explain. Later in this
eBook I will elaborate upon stops used in these trading methods, but I’ll
simply state here that generally you will initially be using 10 pip stops. What
this really means is that the market only has to move 10 pips less your spread
against you to get you stopped out. EUR/USD & EUR/GBP has a 3 pip
spread thus the market needs to only move 7 pips against your direction from
point of entry for you to lose your full 10 pips. Thus the odds of you scoring a
10 pip gain are actually 30% against you from the start. The other currency
pairs listed above have a 4 pip spread, thus the market needs only go 6 pips
against you on a 10 pip stop for you to lose out (40% against you from the
start). The currency pairs with a 5 pip spread can still be traded in special
circumstances, but in general it is best to shy away from these for what should
now be obvious reasons. All the other currency pairs with higher spreads are
absolutely not traded.
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