Liquidity will affect the quality of the bid-offer spread in different time zones and by currency pairs. Spreads will widen many time when there are news announcements of interest to the currency market.EUR/USD had a 2-pip spread while GBP/JPY had a 8-pip spread during in normal market conditions. In the early Asia time zone when markets are very quiet, you will find wider spreads. In the London time zone, when we have much better liquidity, spreads are narrow. When both US and European markets are overlapped you will notice the best liquidity and spreads for trading.
One pip trade on a 100k lot (standard account) is approximately the same for EUR/USD and GBP/JPY, so the value of the two-pip spread in EUR/USD is really four times more than a eight-pip spread in GBP/JPY. However, the volatility of GBP/JPY is about 3 times to EUR/USD. Which means on an average day EUR/USD moves 100pips while GBP/JPY moves 300pips. Some just love the GBP/JPY as it gives more chances of getting in and out of a trade with more pips even a higher spread involve.
Remember to check with your broker, open a demo account or better still open an account to trade. Nothing beats the accuracy of a real account.
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1 comment:
Hi Tony,
Happy Chinese New Year and wishing you a wonderful year of trading! Just wanna thank you for visiting my blog, and hope to catch up soon. Take Care!
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