Been trading for a while but still get confused about when to use bid vs ask prices.
Sometimes there are big spreads between them, and I’m not sure if I should wait or go with what I see. I’ve made bad calls because of this.
How do you decide based on the bid ask spread?
Wide spreads usually mean low liquidity or high volatility, which makes timing really important.
What works for me is checking the spread size compared to my target profit. If the spread eats up more than half of what I expect to make, the trade isn’t worth it.
Market opens and major news events often create wider spreads, so waiting 15-30 minutes after these events usually helps the spread normalize.
Bid price equals what buyers pay. Ask price equals what sellers want. Use limit orders at mid-price during wide spreads. Monitor spread percentage versus position size before entry.
Spreads above 5 pips usually mean I skip the trade completely.
Three months ago I got burned on a crude oil trade because I ignored a massive spread and jumped in at market price.
Lost 40% instantly just from the spread alone. Now I have a rule - if the spread is more than 3 pips on forex or 2% on commodities, I wait.
Usually the spread tightens during active market hours. Patience saved me from similar mistakes since then.
Understanding the spread is crucial. Tight spreads mean you can enter without much risk. For wider spreads, I recommend placing limit orders between the bid and ask. This avoids the full spread cost. You might miss out on some trades, but that beats starting with a loss. Also, pay attention to the asset. Major currency pairs usually have tight spreads. If they don’t, be cautious and consider skipping the trade.