Spread Indicator

What Is a Spread Indicator?

A spread indicator is a measure that addresses the difference between the bid and ask price of a security, currency, or asset. The spread indicator is commonly utilized in a chart to graphically address the spread initially, and is a well known device among forex traders. The indicator, showed as a curve, shows the course of the spread as it connects with the bid and ask price. As a rule, exceptionally liquid currency pairs have lower spreads.

Grasping the Spread Indicator

Spreads are calculated metrics that frequently expect that a trader physically decide the difference among bid and ask prices. For traders attempting to capture small variances in the spread, deciding the spread requires taking care of statements with a large number following the decimal. Subsequently, the spread indicator changes over an exceptionally narrow reach.

Widely traded ETFs, for example, the SPY and the QQQ have extremely tight spreads due to their fame and liquidity. While an asset like an emerging market currency or an illiquid commodity contract will have a broad indicator.

In forex, the EUR/USD and USD/JPY are the most liquid currency pairs and have the smallest spreads, and currency pairs like the USD/THB (Thai bhat) and USD/RUB (Russian ruble) will show the amplest spreads.

Traders are bound to trade in currency pairs with small spreads since it costs less to enter and exit a trade.