Significance of Spread
Most successful Forex trading strategies rely on data correlation and pattern recognition. One aspect that is sometimes overlooked is spread, both in relation to market time and to price movements. Brokers make their profits from spread, commission, or a combination of both. For medium or long-term trades where price movements can be substantial, spread has little impact on profits. However, for strategies involving many trades with small price changes, e.g. scalping, profits can be dramatically affected by spread.
Variation in spread across brokers can be quite significant, and some brokers offer different spreads on different account types. If your trading style is such that spread variations make noticeable changes to profit, then our SpreadMon tool may be of benefit. By logging spread values minute by minute, SpreadMon allows easy and detailed analysis in graphical form over any period of interest. Data is normalized to GMT with no dependence on server-time, and thus it is possible to display and compare spread data from several brokers in a single chart.
- Current release SpreadMon v1.30 build 018
- Easy to interpret histogram which displays spread over any chosen interval
- Clearly shows correlation between spread and price movements
- Identifies the best time to exit trades at week's end as markets around the world close
- Compare spreads from different Brokers on the same chart
- Displays maximum, minimum and weighted-average spread down to a resolution of one minute per bar
- Recording is independent of time-frame, and Server-time automatically adjusts to GMT
- Low-overhead mode which uses minimal resources on live accounts
- Separate versions of SpreadMon available for MetaTrader 4 and MetaTrader 5
- Data is stored in simple CSV format, and thus can be exchanged with spreadsheets if desired
The following video illustrates the functionality of SpreadMon using a mix of actual data captured in demo accounts from various Brokers. Stress testing over longer periods required pseudo data that was generated in a test environment, and this also appears in the demonstration where appropriate. All information included here is strictly for demonstration purposes, and should NOT be relied upon and applied to a live trading situation without verifying results that relate directly to your trading environment.
Comparison of Spread from Different Brokers
As mentioned above, data captured in various MetaTrader terminal instances can be saved and imported for display on a single chart. There are no restrictions on which files are compared, but it is assumed that data-files are only compared with those from the same currency pairs. It should be noted that one of the sub-windows in the following image shows a substantially lower spread because it is offset by commission charges.