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Understanding Spread and Stop-Out on Walbi
Understanding Spread and Stop-Out on Walbi

Learn why your Walbi trade starts negative due to the spread, and how to manage risk with stop-out. 📉💡

Jacob avatar
Written by Jacob
Updated over a month ago

Why Does My Trade Start Negative on Walbi? 🤔

When you open a trade on Walbi, you may notice that your profit starts in the negative. Don’t worry—this is normal and primarily due to one key factor: the spread. Let’s break down how the spread works and why it's common to see negative profit initially. 📊


1. The Spread: The Initial Cost of Trading 💰

The spread is the difference between the ask price (the price you buy at) and the bid price (the price you sell at). Every trade on Walbi is subject to this spread, which operates as follows:

  • Buy orders open at the higher ask price and close at the lower bid price.

  • Sell orders open at the lower bid price and close at the higher ask price.

Since the ask price is always higher than the bid price, your trade starts with a small loss—equal to the spread. For your trade to become profitable, the market must move in your favor by at least the size of the spread. 📉➡️📈

Example:

Suppose you want to buy an asset quoted at 1.2000/1.2002 (bid/ask spread). If you open a buy order at 1.2002 (the ask price), your trade will show an initial loss because you could only sell at 1.2000 (the bid price). The 2-pip difference is the spread, causing your profit to start negative.

The market needs to rise above 1.2002 for you to break even and start seeing positive returns. This initial loss is simply the cost of entering a trade and is common in any market with a spread.


2. Stop-Out: Protection from Major Losses ⚠️

The stop-out mechanism is a safety feature designed to protect you from substantial losses. However, it’s important to note that stop-out does not cause the initial negative profit—that's purely due to the spread.

Stop-out comes into play only when the market moves significantly against you, automatically closing your position to prevent further losses. It’s an essential tool for managing risk but unrelated to the initial loss you see when opening a trade.

Example of Stop-Out:

Let’s say you open a trade with a $1,000 investment. If the market moves sharply against you, and your losses hit a critical threshold, the stop-out mechanism will close your position automatically to prevent further loss. But remember, this only happens if the market moves significantly against you, not at the point of trade entry.


Conclusion: Spread = Initial Negative Profit 🔍

On Walbi, the spread is the primary reason your trade starts with a negative profit. This spread represents the cost of entering a trade and must be covered by favorable market movement for your trade to become profitable. 📉➡️📈

While the stop-out feature is vital for protecting against significant losses, it doesn't affect the initial negative balance. Instead, it acts as a safeguard if the market moves too far against your position.

By understanding how the spread impacts your trades from the start, you can better manage your expectations and strategies when trading on Walbi. 🚀


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