SpreadWarner Indicator
MT5Also Available for MT4The SpreadWarner indicator shows the spread for a trading instrument. Thanks to this, you can assess the volatility of the Forex market assets at the current moment.
Description
The spread, like the broker’s commission, negatively affects the efficiency of your forex trading. For example, immediately after opening a position, you immediately see a minus in the profit column. Although the spread and commission negatively affect your deposit, they are a profit for the broker. The fee is fixed and you can check it on your broker’s website. Spread is a parameter that is determined by supply and demand in the market, and you can control it. But, unfortunately, there is no indicator in the MT5 terminal that informs you about the spread by default. The SpreadWarner indicator was specifically created to solve this problem. You can learn more about this in our article.
Indicator Description and Features
The SpreadWarner indicator shows the difference between the buy price (Bid) and the sell price (Ask).
This value is called “spread”. Immediately after opening a position, it is recorded in your trading account as a mandatory expense to be covered.
The indicator is built in a window that contains a histogram of spread changes. It also contains the spread value at the current time.
For example, in this case, the spread for the GBP/USD currency pair is 1 pip. This means that when trading, you will have to pay the difference of 1 pip between Bid and Ask.
The spread may increase in the following cases:
– in case of increased volatility at the time of release of economic news;
– when working with low-liquid instrument;
– when the price reaches important levels.
In the chart above, the green bar of the indicator shows the standard spread size in the past.
This means that the trading situation is currently stable. If all factors are present (obvious trend, signals from your trading system and risk/reward ratio, etc.) you can open a promising trade.
- What is the point of evaluating the spread value?
We recommend that you always pay attention to the spread. It depends on the assets you use, as well as the trading strategy and time of holding open positions.
For example, with the exotic currency pair EUR/SEK, be prepared to cover a spread of 490 pips.
It should be noted that in this trading situation the market is calm and the spread is not widened. In the opposite situation, it will probably be 1.5–2 times wider.
Thus, when trading non-standard assets, you need to carefully monitor the spread. You must include it in the loss amount of the planned trade in advance.
The reverse situation, where the difference between the ask and the bid increases, is shown at the top of the chart above. When the spread widens, the SpreadWarner indicator colors the spread size and the histogram.
Spreads can be either fixed or floating. In most cases they are floating.
Thanks to this, brokers increase their attractiveness among forex market participants. This is compared to those brokers who have fixed spreads.
Regardless of your experience in the forex market, the SpreadWarner indicator can be a useful addition to your trading system. Let’s look at the main factors to consider before trading:
First, you should pay attention to the liquidity of the trading instrument. After all, as we just saw above, spreads can be of different sizes.
Secondly, it is recommended to pre-determine targets/stops for promising positions, taking into account the spread.
As soon as you know the price of one point of a trading asset, even before opening a position, you can calculate the value of the spread in monetary terms. If you know that the possible profit will cover the spread, you can see if it will be profitable to trade.
Thirdly, keep an eye on possible spread widening by keeping an eye on the news calendar and important technical levels.
This small disadvantage is caused by the fact that the indicator only shows the most important information. At the same time, it is quite noticeable and does not distract when analyzing the price.
At the end of the day, the Spread Warner indicator fully performs its main function – it warns you about the size of the spread. And the combination of a simple interface and practical advantages can help you in your daily Forex trading.
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