When wider spreads kept traders out of fakeouts
Posted: Tue Oct 20, 2026 2:32 pm
It sounds backward, but spread filters sometimes help in an unexpected way: they keep you out of trades during conditions that often produce false moves.
Why? Spreads widen when liquidity drops. Low liquidity also produces erratic, unreliable price action. So a spread filter acts as an indirect liquidity filter.
Examples:
- 08:00 UK: spreads wide for the first minute, and the first-minute move often reverses.
- Pre-news: spreads widen, price makes small spikes that look like breakouts but aren't.
- Late Friday: spreads widen, moves lack follow-through.
If you check your skipped trades (those blocked by the spread filter), you might find that many would have been losing trades, not just because of the cost, but because the price action itself was poor.
This doesn't mean wide spreads always predict bad trades. But it suggests spread filters do more than save cost.
Has anyone checked what their spread-filtered trades would have done?
Why? Spreads widen when liquidity drops. Low liquidity also produces erratic, unreliable price action. So a spread filter acts as an indirect liquidity filter.
Examples:
- 08:00 UK: spreads wide for the first minute, and the first-minute move often reverses.
- Pre-news: spreads widen, price makes small spikes that look like breakouts but aren't.
- Late Friday: spreads widen, moves lack follow-through.
If you check your skipped trades (those blocked by the spread filter), you might find that many would have been losing trades, not just because of the cost, but because the price action itself was poor.
This doesn't mean wide spreads always predict bad trades. But it suggests spread filters do more than save cost.
Has anyone checked what their spread-filtered trades would have done?