Forex charts usually only display the bid and ask price. Some display an average, but most platforms pick one an run with it.
In the case of Metatrader, it only displays the bid price.
But it can be beneficial to display the ask line too. In this post I will show you why this is the case and how to activate the ask line on your charts.
You may choose to stop trading some pairs after reading this post. Here’s why…
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Bid Ask Definition
Before we get started, let’s take a minute to define the bid ask spread…if you are not familiar with the term. In spot FX, most retail brokers don’t charge a commission, like in other markets.
They get paid through the small difference in prices, between the buy and sell prices.
For example, the EURUSD currently has the following pricing:
- Ask: 1.07444
- Bid: 1.07433
You can buy the EURUSD at 1.07444 and sell it at 1.07433. So there is a 1.1 pip spread between the bid and ask.
This is why you automatically have a small loss, every time you enter a trade. There is a spread in trading because brokers and dealers (in other markets) need to make a profit, in exchange for providing liquidity.
Now that we have that out of the way, here is how to show the ask line on your MT4 chart.
How to Show the Bid Ask Spread Lines in Metatrader 4
I think that a video is the best way to show you how to do this. If you prefer the text version, it is provided below the video.
Adding the ask line to your charts is very easy. First right-click anywhere on your chart and select Properties.
Then click on the Common tab and check the Show Ask line box. Click on the OK button and you are ready to go.
Keep in mind that you may not be able to see the ask line when you are on higher timeframes. Drill down to the lower timeframes to see the ask line.
If you still cannot see the ask line, then check to see that it is the right color. Go back into your properties and check to see that the grid and ask lines are the correct color.
The bid line will cover the ask line on higher timeframes, so this is another reason that you cannot see the ask line.
Why It’s Important to Show the Ask Line
But why does it matter?
OK, let’s say that you want to go the short a currency pair. When you go short, you will sell at the bid and buy it back at the ask.
Since you are only watching the bid, you might set your stop too tight and get stopped out too soon. This is especially true for pairs that have a large spread.
Avoid Pairs With Very Wide Bid Ask Spreads
After you add the ask line to your charts, you may notice that there are some pairs that are just not worth trading. For example, I avoid the GBPNZD because it has a wider than average spread.
This means that I will have to use a much wider than average stop loss, when trading this pair. In my opinion, it’s just not worth it and I would rather simply avoid the pair altogether.
Some of the more exotic pairs have really big spreads, especially during volatile market conditions.
So that is how to add the ask line to your Metatrader 4 charts…and more importantly why you should do it.
Do you use the ask line? Let us know in the comments below…