SpreadWarner Indicator

SpreadWarner Indicator

The indicator shows the spread for the trading instrument. Thanks to this you can evaluate the volatility of forex market assets at the current moment. As a result, you can choose a suitable opportunity to trade.

Spread, as well as the broker’s commission, has a negative impact on the efficiency of your forex trading. For instance, right after you open a position, you immediately see a minus sign in the profit column. While spread and commission have a negative effect on your deposit, they are a profit for the broker. The amount of commission is fixed and you can check its size on your broker’s website. The spread is a parameter that is determined by supply and demand in the market, and you can control it. But, unfortunately, the MT4 terminal doesn’t have an indicator that informs you of the spread value by default. The SpreadWarner indicator was specifically created to solve this problem. In our article, you can find out more about it.

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 being fixed in your trading account as an obligatory expense to be covered.

The indicator is plotted in a window, which contains a histogram of spread changes. It also contains the value of the spread at the current moment of time.

For example, in this case, there is a 1 point spread for the currency pair GBP/USD. This means that when trading, you will have to pay the 1 point difference between the Bid and Ask.

The spread may increase in the following cases:

– in case of increased volatility at the moment of economic news release;

– when dealing with a low liquidity instrument;

– when the price reaches important levels.

In the chart above, the green scale of the indicator displays the standard spread size in the past.

This means that the trading situation is stable at the moment. In the presence of all factors ( the obvious trend, signals of your trading system and the risk-reward ratio, etc.) you can open a promising trade.

What’s the point of estimating the spread value
We recommend you always pay attention to the value of the spread. It depends on the assets you are using, as well as the trading strategy and the time of holding open positions.

For instance, with the exotic currency pair EUR/SEK, be prepared to cover a spread of 490 pips.

It’s worth noting that in this particular trading situation, the market is calm and the spread is not widened. In the opposite situation, it will probably be 1.5 to 2 times wider.

Thus, when trading non-standard assets, you have to be attentive to the spread. You have to include it in the loss amount of the planned transaction in advance.

The reverse situation, when the difference between the ask and bid is widened, is shown at the top of the chart above. When the spread widens, the SpreadWarner indicator colors both the spread size and the histogram.

Spreads may be either fixed or floating. In most cases, they are floating.

Thanks to this brokers increase their attractiveness among the forex market participants. It happens in comparison with those brokers, whose spreads are fixed.

Regardless of your experience in the forex market, the SpreadWarner indicator can be a useful addition to your trading system. Let’s review the main factors to consider before you start trading:

First, you should pay attention to the liquidity of the trading instrument. After all, as we just witnessed above, spreads can be of different sizes.

Secondly, it is recommended to determine in advance the targets/stops for the promising positions, while taking the spread into account.

Once you know the price for one pip of the trading asset, even before you open the position, you can calculate the spread value in terms of money. If you know that the possible profit will cover the spread value, you can see whether it would be profitable to trade.

Third, keep an eye on possible spread widening by following the news calendar and important technical levels.

This minor disadvantage is caused by the fact that the indicator shows only the most important information. At the same time, it is sufficiently noticeable and doesn’t distract you during the price analysis.

At the end of the day, the Spread Warner indicator fully performs its main function – alerting you regarding the spread size. And the combination of a simple interface and practical benefits can help you in your daily forex trading.