Today we look at the spread monitoring indicator. This indicator plots the minimum, maximum and the average spread on each candle. Since the spread data needs to be collected in real time, the indicator may not be suitable for higher time frames.
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How to evaluate the spread info?
Think of a situation where you buy a product from a shopkeeper at price X. But the very next moment you decide you dont need the product anymore and want to return it back to the shopkeeper. The shopkeeper however is interested to pay you back only a amount Y. (which will usually be a bit smaller than X). Spread is the difference X-Y
What does the spread aka difference X-Y tells you the market situation of the product? What does it mean when spread is large? What does it mean when spread is small?
Think about the four situations below and what it tells you about the market.
- large volume small spread
- large volume large spread
- small volume small spread
- small volume small spread
