Spreads Indicator for Metatrader 4
The Spreads Indicator for MT4 (Metatrader 4) shows the difference between the bid and ask price of a currency. The bid price is the price a trader is willing to pay while the ask price is the price a trader is willing to accept. Naturally, the ask price is always higher than the bid price, and the difference between them is called the spread. The spread can also be seen as the instant loss that occurs when entering a position.
- Shows the value of the spread in pips
- Automatically calculates the cost per lot in the chosen currency (instant loss)
- Presents the spread value as a percentage of the average range in different timeframes
- Color based system according to the cost level
How to use the Spreads Indicator
The values of the Spreads Indicator tell traders if it is a good time to trade the currency pair, in case the spread is low. If the spread is high, traders should wait for it to come down and only then open a position.
By using the Spreads Indicator, a trader can see the current spread in points and its proportion relative to different timeframes. Looking at the spread proportionally to the average range is important because it allows analyzing the RELATIVE costs: for instance, a 4 pips spread in a currency that moves 400 pips daily, is actually cheaper than trading a 2 pips spread in a currency that moves just 100 pips daily. On the first case, the spread is 1% of the daily range, while in the former case it’s 2% of the daily range. The same logic applies to other timeframes.
A usual rule is not to buy if the spread is bigger than 25% of the actual timeframe’s range. By looking at Cost/Lot, the trader can see immediately his instant loss if buying one lot of the base currency.