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does the spread affect where i can set my stop loss?

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@maasai_princess - 6 months ago - Risk Management

Hi guys, please does the spread charged by a broker have any effect on how i set my stop loss? if it does then i see why i should only go for low spread forex brokers

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@pierre_r_carosso - 6 months ago

Yes, it does! the wider the spread, the wider your stop loss has to be. This is why spread is so important when choosing a broker to trade with.

You cannot place a stop loss lower than your entry price, so a wide spread means a high entry price so you must place your stop loss even higher thus increasing your risk exposure.

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@lawanf - 6 months ago

I agree with @Pierre, if broker A charges a spread of 1.0 pips and broker B charges 1.5 pips on same instrument; you will be able to set your stop loss 0.5 pips closer to your entry price than you would have been able to do with broker B.

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@andy_colgate_nottinghill - 3 months ago

Yes, because spread means a higher ask price and a lower bid price. This means if you are short, your stop loss must be placed above the ask price and if you are long your stop must be placed below the bid price

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@brenda_lesotho - 3 weeks ago

Oh yes it does. If the spread on an instrument is wide, you had better set a wide stop loss or you will keep getting stopped out easily.

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@brenda_lesotho - 3 weeks ago

When spread is high, the distance between bid and ask price becomes wider. If you took a short position like in the image i attched, then watch the ask price line because once it reaches your stop loss you will be kicked out of the market. Also if you are long, always watch the bid price line as you will be kicked out of the market when it reaches your stop loss.

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