Currency Pairs

As you can see, when the spread is set as a percentage of daily average movement, you can see that the spread is a pretty significant part of the pips that potentially we can get and that can have a high impact on intraday strategies. This is often quite contradictory to those traders who believe they are free trade and one not pays any commission.

If a trader makes an active day trading, focusing on one currency pair and operate every day, this impact will be less if you choose those pairs in which the spread represents a smaller percentage of the daily average range, range is definitely the most number of pips that could get in a day. The EUR / USD and GBP / USD show the best ratio in comparison to other currency pairs.

Notice how the GBP / USD, even with a spread greater than USD / JPY has a better ratio. When talking about the USD / CAD, having 4 points spread as the GBP / USD, happens to be one of the toughest pairs for day trading, with a ratio spread / RDM of about 6.5%. Pairs as these are best for long-term strategies where the spread is less significant compared to the length of the movements.

Adding realism
Let's assume that the trader is able to exit / enter the 10% upper / lower daily range, this is a bit more realistic and that the trader would have 80% of the average daily range as his maximum potential pips. Using 80% of the average daily range in the above calculations that the spread will have an even greater impact than we expected.

As we see now, with the exception of EUR / USD, in all pairs the spread is more than 4% of the maximum potential gain that we would have to make day trading, assuming that we are able to capture 80% of the average daily range.

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