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The Break-Even Distance When You Read the Chart on the Bid

Scenario: your platform chart shows the bid price. You plan a long scalp with a target of 6 pips. The spread is 1.5 pips. How far must the chart move for you to make the 6 pips you intend?

Work it out. You buy at the ask, which is the bid plus the spread. Say the bid is 1.1000, so you buy at 1.10015. The position is closed at the bid when you sell. To profit 6 pips net, the bid must reach 1.10015 plus 6 pips, which is 1.10075. From the current bid of 1.1000, that is a 7.5-pip rise on the chart.

So a target drawn 6 pips above the visible price delivers only 4.5 pips of profit if the line is hit at the bid. If the chart touches 1.1006 on the bid, you have earned 4.5 pips net, not 6.

The reverse applies to a stop. A long stop at 1.0990 on the bid triggers when the bid reaches that level, a 10-pip drop from 1.1000, and you lose the 10 pips plus the 1.5-pip spread you paid, for a total of 11.5 pips from your intended entry.

For short trades, the entry is at the bid and the exit at the ask, so the take profit and stop trigger on the ask.

Takeaway: always add the spread to the distance you need the chart to travel.

Practical step: turn on the ask price line on your chart, and re-measure your last five targets against it.

Many beginners set targets on the chart without accounting for the spread. In wider spread hours, like late in the Asian session for EURUSD, that difference can be significant relative to a small target.

A standard chart is drawn from bid prices. That is fine for a long position that exits with a sell at the bid. A short is different: it closes by buying at the ask, and the ask is the bid plus the spread. So a short's stop sitting just above a visible high does not get triggered when the chart's high touches it. It gets triggered when the bid high plus the spread reaches it, which is earlier.

Practically, that means a stop placed 1 pip above a wick on the chart can be hit by a wick that the chart shows falling short of it. On a pair with a 1 pip spread during the active session, and a much wider one around rollover, this explains many of those "it never even touched the level" stop-outs. It did touch, just on the ask side.

The opinion part: anyone placing tight stops against chart structure and ignoring the spread is working with a drawing, not with the market. Either show ask prices on the chart or pad every short stop by the current spread.

Do you plot the ask line on your charts, or do you add the spread to short stops by hand?

The arithmetic is a good illustration of a cost that's easy to forget. With a 1.5 pip spread, a target drawn 6 pips above the visible bid delivers only 4.5 pips of profit. For a scalper aiming at 6 pips, that's a 25 percent reduction in every winning trade. And the stop loses 11.5 pips instead of 10. So the trade's ratio changes from 6 to 10, or 0.6, to 4.5 to 11.5, about 0.39. The break even win rate rises from about 63 percent to about 72 percent. For tight scalping targets, the spread can easily be the difference between a viable strategy and an unprofitable one.

Turning on the ask line, as the practical step suggests, is one of the most useful chart settings for anyone trading short term. Most platforms have an option to display the ask price as a second line, which makes the spread visible at all times. It's especially revealing during news and around the daily rollover, when the gap between the two lines widens noticeably. Watching the ask line for a few days gives a feel for when spreads are tight and when they widen, which can help choose better times to enter and avoid times when costs are high.

After reading this I switched on the ask line and went back over my last five scalps. My targets were all 5 pips on EUR/USD with an average spread of 0.9, so the net target was really 4.1 pips, and two of the five trades I had marked as small winners were break even once I recounted.

The entry side cost me more. When I place a buy limit at a level I see on the bid chart, it fills only when the ask comes down to it, so the bid has to trade about a pip lower. Several times I watched price touch within a pip of my limit, bounce and leave without me, and I blamed bad luck. Now I place buy limits one spread below the visible level and sell limits one spread above, and I get filled more often.

I also write the target as a net number first, then convert it to a chart level.

Amanhasnoname wrote:After reading this I switched on the ask line and went back over my last five scalps.

Fair play for actually going back through the five, Amanhasnoname, most of us just read it and nod. One thing I'd add: your sell limit sits on the ask side too, so that bit is spot on, but keep an eye on it around rollover when the spread goes proper wide, as a fixed one-pip pad wont cover it. I reckon a quick note of the live spread next to each trade in your log is worth it tbh, cheers for sharing the numbers

For short trades, the reverse logic applies, and it's worth spelling out. A short enters at the bid, which is the price shown on the chart, so there's no hidden cost at entry. But the take profit and stop trigger on the ask. A short target drawn 6 pips below the bid will only trigger when the ask reaches it, which means the bid must fall 7.5 pips. A short stop drawn above the bid triggers when the ask reaches it, which can happen before the bid gets there, especially if the spread widens. So shorts face the spread cost at exit instead of entry.

The takeaway, adding the spread to the distance the chart must travel, is simple but often overlooked. Many traders place targets at visible levels like round numbers or swing highs, without adjusting for the spread. For longs, placing the target a pip or two below the level, rather than at it, improves the chance of being filled. For shorts, placing the stop a pip or two further beyond the level avoids being stopped by spread widening. Has anyone here had a target missed or a stop hit because of the spread? It's a frustrating experience that most traders encounter eventually.

Good point on rollover, gwhitlock64, and I had not thought hard enough about it. My one spread pad was built from the quiet London hours when EUR/USD sat around 0.9, so it only protects me in the conditions I tested. I went back and checked a few evenings, and around the daily rollover the spread on my broker jumped to somewhere between 2 and 4 pips for a few minutes. A buy limit padded by one pip would just sit there untouched, or worse, fill when the quote spikes and the trade starts underwater.

Since reading your note I have done two things. I stopped placing limits in the half hour around rollover altogether, because the numbers there are not worth the noise. And I added a spread column to my log, as you suggested, which I fill in at the moment of entry. After ten trades I could already see that my worst fills lined up with the widest spreads.

It is a small bit of admin, but it showed me the pad should move with the spread rather than stay fixed, so thanks for the nudge.