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Re: What determines dynamic spread?

#2
DocYummy77 wrote:
Fri Dec 04, 2020 7:01 am
Hi all

I know what a dynamic spread is, but what is the driver for it? Was checking US30 and spread moved from 1.5 points to 5.7 points at some stage.
Hi, the answer is volatility. brokers that use a variable spread system can keep spreads relatively tight when there is normal volatility but when vol. increases they will increase the spread as price handles become harder to find to pass onto their clients without constant requotes.

Re: What determines dynamic spread?

#4
DocYummy77 wrote:
Fri Dec 04, 2020 7:31 pm
Thank you @Ogee.
you are welcome, I could have also added that brokers may well use these times of increased volatility, and the need for longer reach to find prices, to also stretch out their own profits but presumed most could work that one out for themselves :oops:

Re: What determines dynamic spread?

#5
Ogee wrote:
Fri Dec 04, 2020 8:11 pm
DocYummy77 wrote:
Fri Dec 04, 2020 7:31 pm
Thank you @Ogee.
you are welcome, I could have also added that brokers may well use these times of increased volatility, and the need for longer reach to find prices, to also stretch out their own profits but presumed most could work that one out for themselves :oops:
Yes that would make perfect sense. I'm too new in the game to pick up the finer nuances of when a broker is getting ridiculous with its spreads, but it was quite obvious it jumped.


Re: What determines dynamic spread?

#6
DocYummy77 wrote:
Fri Dec 04, 2020 8:53 pm
Ogee wrote:
Fri Dec 04, 2020 8:11 pm

you are welcome, I could have also added that brokers may well use these times of increased volatility, and the need for longer reach to find prices, to also stretch out their own profits but presumed most could work that one out for themselves :oops:
Yes that would make perfect sense. I'm too new in the game to pick up the finer nuances of when a broker is getting ridiculous with its spreads, but it was quite obvious it jumped.
The spread is the difference between the best available buy price and the best available sell price, you could imagine that if a big buyer steps in and buys multiple price handles all at once then that is going to leave a bigger than normal gap between the new best available buy and sell price.

Re: What determines dynamic spread?

#7
Ogee wrote:
Fri Dec 04, 2020 9:20 pm
DocYummy77 wrote:
Fri Dec 04, 2020 8:53 pm


Yes that would make perfect sense. I'm too new in the game to pick up the finer nuances of when a broker is getting ridiculous with its spreads, but it was quite obvious it jumped.
The spread is the difference between the best available buy price and the best available sell price, you could imagine that if a big buyer steps in and buys multiple price handles all at once then that is going to leave a bigger than normal gap between the new best available buy and sell price.
Aaah well said.

Re: What determines dynamic spread?

#8
DocYummy77 wrote:
Sat Dec 05, 2020 4:14 am
Aaah well said.
Adding to this, if I may:

What's the best Forex spread to choose, Dynamic or Fixed?

  • For long-term traders = Dynamic
  • For day traders & scalpers = Fixed

Why? For long-term traders who trade the higher timeframes (also known as position traders), dynamic spread is the best option because you can enter and exit the market during times when the spread is low.

For regular, day traders who trade the lower timeframes and scalp (timeframes below the Daily chart), fixed spreads are a better option, as you're able to trade with a decent spread which won't drastically change due to the high volatility.
Fixed-Spread-VS-Dynamic-Spread-Forex.jpg
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Re: What determines dynamic spread?

#9
Jimmy wrote:
Mon Dec 07, 2020 9:57 pm
DocYummy77 wrote:
Sat Dec 05, 2020 4:14 am
Aaah well said.
Adding to this, if I may:

What's the best Forex spread to choose, Dynamic or Fixed?

  • For long-term traders = Dynamic
  • For day traders & scalpers = Fixed

Why? For long-term traders who trade the higher timeframes (also known as position traders), dynamic spread is the best option because you can enter and exit the market during times when the spread is low.

For regular, day traders who trade the lower timeframes and scalp (timeframes below the Daily chart), fixed spreads are a better option, as you're able to trade with a decent spread which won't drastically change due to the high volatility.
Thank you very much for this I was just going to ask a question about this but will do it in another thread.