What is spread in CFDs?
Definition:
The spread is the difference between an instrument's buy and sell prices.
The quoted price is always higher than the sell price, and the underlying market price is somewhere in the middle of these two prices.
When you enter a trade, you will either buy or sell the product in question, depending on whether you believe the market price will rise or fall.
It will be a profitable trade once your trade is placed and the price has moved above the cost of the spread else the trade will not be profitable.
The spread is one of the most important costs associated with CFDs trading.
It should be noted that there are other potential costs to consider, see CFDs for other costs.
Case of USD/EURO Trade: On the above trade there are two trades.
Trade 1
On the above with 1.06934 the trader sold product with prediction the prices will fall. Considering the market as then, the trader had profit of +$6.20 since the market fell and went past the spread cost set at that time - Going short. If the trader decided to close the trade a profit of $6.20 will be deposited in the account.
Trade 2
Still on the same the trader entered with price market offer of 1.06879. The trader bought with prediction market will fall. Which actually fell and went past spread cost hence profit of +$0.70. If the trader decided to close the trade at that point, a profit of $0.70 would be deposited in the trader's account as profit.
If the trader was to open another trader at that point, the market offer will be at 1.068607. If the trader was to predict either the product to rise or fall, then product has to cross "spread" margin shown to either realize profit . The opposite is also true.
Social Plugin