How To View The Bid-Ask Spread In MetaTrader 4

One of the most overlooked aspects of Forex trading is the cost of opening a trade position.

At the usual cost of 2 – 4 pips, the bid-ask spread is not something that’s taken seriously by retail traders.

In fact, I would say that it’s typically ignored.

After all, it’s not something that traders can avoid… so why worry about it?

To understand this issue, let’s look at the graphical representation of the bid-ask spread on the trading chart.

View The Bid-Ask Spread In MetaTrader 4

First, right-click anywhere on the chart and click “Properties”.

 

In the chart properties window, select your choice of colors for the bid and ask lines.

The “Grid” color = Bid line color

The “Ask line” color = Ask line color

For illustrative purposes I’ve selected red for the bid line, and blue for the ask line.

Next, go to the “Common” tab.

Check the “Show Ask line” radio button.

Un-check the “Show grid” radio button.

Then click “OK”.

And voilà, you can now see the bid-ask lines on your trading chart.

But What’s The Point Of This?

As you’ve read in the Retail Forex Manifesto, the bid-ask spread is an operational expense. It’s the cost you pay regardless of whether you profit from the trade.

And the larger the spread is – in relation to the profit potential – the less worthwhile the trade is.

Let’s look at a chart example:


Here you can see that prices have dipped significantly, and is now consolidating.

If you’re an intraday trader or scalper, you might be looking to profit from this ranging price action.

But look what happens when we include the bid-ask spread on the chart:


As you can see, the bid-ask spread (the area between the blue and red lines) takes up most of the ranging price action.

To make a profit in such a situation, you’d not only have to correctly anticipate prices continuing to consolidate, you’d also have to click fast enough catch prices at the top and bottom of the range.

In the image below, the yellow areas are where you’d have to enter a buy/sell trade in order to make a profit… of just 1 – 2 pips.

So which time frame do you think this chart is showing?

It’s the 5 minute time frame.

Now contrast this to a similar situation on the 1 hour time frame:


Since the spread is proportionately smaller in relation to the price swings, we get a lot more opportunities for a larger potential profit of 6 – 10 pips.

This is an often overlooked detail of short-term trading, which significantly reduces its profitability and sustainability over the long run.

As mentioned in the Retail Forex Manifesto, if you’re going to be trading for a long time you’ll need to adopt a trading approach that stacks the odds in your favor.

Based on the 2 examples we’ve just seen, it’s clear which one offers more opportunities for a profit (i.e. fewer losses), and with a larger profit potential.

Don’t Sell Ice To Eskimos

Short-term trading is appealing to many traders because it promises “quick profits” and “instant wins”.

The reality of it however, is that it is a way of trading where you are most unlikely to keep winning.

In the meantime, your broker will be smiling all the way to the bank with the huge chunk of fees it has collected from you.

As with many other areas in life, it pays to choose to play the game that gives you the best chance of winning.

I Hope This Guide Has Been Helpful

Nevertheless, if anyone reading this insists on short-term trading, I hope this quick tutorial on the bid-ask spread can help them make better trading decisions.

As for me, I’ll continue trading on the longer time frames with the Icarus method.

What do you think? Let me know in the comments below!

By |2019-03-16T19:15:29+00:00March 16th, 2019|How To|18 Comments

18 Comments

  1. Wayne St John December 8, 2012 at 4:07 am - Reply

    Yes it is helpful.

  2. arnold December 8, 2012 at 6:01 am - Reply

    Chris, thanks a lot. This is one trick that I am going to use. I hope that you will share more with us.

    Arnold

  3. Terry December 8, 2012 at 6:09 am - Reply

    Yes, I agree with you, Chris: Icarus Method is so realistic and productive method for retail traders like us…the Pipmavens.
    In addition, I would like to say to non-Pipmavens traders, especially to scalpers: this blog help to open the eyes,because it shows exactly how Forex Brokers are recruiting many many amateur retail scalper traders to contribute (with their own money of their live account, in rising of banks capital and assets. Unfortunately, this is the truth of the Market Field…And lucky Pipmavens that are participating on the other side of the Market Field,…on the side of winners!…

  4. ng December 8, 2012 at 7:05 am - Reply

    TQ chris,good point

  5. jeffrey teow December 8, 2012 at 9:36 am - Reply

    It all depend on the volatility of the day, on news day, scalping will be profitable, normal day, then it may be useful as a reminder not to trade. Thanks

  6. Tom December 8, 2012 at 10:05 am - Reply

    Very useful information. Depending on one’s “time preference” the
    bid-ask spread can obviously make a BIG difference.

  7. KEVIN December 8, 2012 at 2:02 pm - Reply

    THANKS CHRIS THAT WAS HELPFUL !

    CHEERS !

    KEV

  8. Omar December 8, 2012 at 3:06 pm - Reply

    Exalente ¡ Chirs , me sirvio de mucho tu comentario , seguire tus consejos que son muy valederos para mi , gracias y un abrazo ¡ … Maestro ¡ …

  9. Chris Lee December 8, 2012 at 3:46 pm - Reply

    Hi guys,

    I’m very glad to know that this post has been helpful.

    I’ll definitely be putting up more of such posts in the future.

  10. Carl Menako December 8, 2012 at 6:10 pm - Reply

    Hi Chris

    Thank you for taking the time to explain even the most obvious. Forex is complicated. We all can thank you for your efforts. I have learned many things from you and I hope to be like you some day!

    Thank you!
    Carl

  11. jashim December 9, 2012 at 8:43 am - Reply

    Chris,
    thanks a lot. Very useful information indeed. I hope that you will share such kind of informative information more with us.

  12. Tshidiso December 10, 2012 at 9:38 am - Reply

    My new year’s trading resolution; Never trade short term time frame only 4hrs upwards. This year I failed dismally trading 1hr and 15min TFs. They are the waist of time and money stealers. Of cause that is my opinion and experience.

  13. Richard February 2, 2013 at 9:10 am - Reply

    Thanks for useful info,still wish could afford Candle sticks made easy but still not in a position to purchase at this time

    God bless
    Richard (South Africa)

  14. Ralph February 3, 2013 at 7:13 pm - Reply

    Hello Chris

    Thank you for this it was one area I was doing not doing my best to control. Also thank you for showing us how to put the bid/ask price lines on the charts.

    Ralph

  15. Michael Fraser February 12, 2013 at 11:36 am - Reply

    Thanks so much Chris,

    This was exactly what I was looking for after tiring to do on the fly spread calculations to see short term profit potential. so Thank you and I cant wait to read more :D.

    • Chris Lee February 12, 2013 at 11:55 am - Reply

      Hi Michael,

      You’re most welcome. Glad I could help.

  16. Casa March 5, 2017 at 6:43 am - Reply

    great article, thanks. I think you may have the Bid & Ask boxes the wrong way round on your first screenshot example above. The Ask line is above the Bid.

  17. Anthony J PENDER March 27, 2018 at 5:33 am - Reply

    I think the longer trading times are better for trading.

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