The Spreads

In forex trading, the spread refers to the difference between the buying and selling price of a currency pair. It represents the cost of executing a trade and is typically measured in pips. 

Spreads can vary among different currency pairs and are influenced by various factors such as market liquidity, volatility, and the broker you're using.

To avoid closed positions when spreads increases, you can consider the following strategies:

1. Time your trades: Be aware of the market hours and liquidity of the currency pairs you're trading. Spreads tend to widen during periods of low liquidity, such as at night or during major news releases. Avoid trading during these times if you're concerned about increased spreads.
2. Use limit orders: Instead of executing market orders, which are susceptible to widening spreads, you can use limit orders to enter trades. A limit order allows you to set a specific entry price, and if the market reaches that level, your order will be triggered. This way, you have more control over the price at which you enter the trade and can potentially avoid wider spreads.
3. Choose the right broker: Different brokers offer varying spreads, so it's important to choose a reputable broker with competitive pricing. Look for brokers that offer tight spreads, especially during the times you typically trade. Research and compare spreads among different brokers before selecting one.
4. Consider trading major currency pairs: Major currency pairs like EUR/USD, GBP/USD, and USD/JPY typically have tighter spreads due to their high liquidity. Trading these pairs can reduce the impact of widening spreads compared to exotic or less liquid currency pairs.

Why do spreads widen at night?

Forex spreads can widen at night due to lower trading volume and liquidity in the market bringing in not convenient conditions for half an hour or so at USA closing bell's ring.

With fewer participants actively trading, the available buyers and sellers decrease, leading to a reduction in market depth. As a result, the spread between the bid and ask prices of currency pairs can widen. 

For example, let's say it's nighttime in the United States, and the major financial markets like New York and London are closed. Traders in these regions are not actively participating, resulting in reduced liquidity. If a trader wants to execute a trade during this period, they may face wider spreads compared to the trading hours when these markets are open.

Additionally, economic news releases are less frequent during nighttime, causing a decrease in market activity and potentially widening spreads. Traders should be cautious during such times and consider the impact of wider spreads on their trading strategies and risk management.

Remove or adjust your stop losses to avoid problems

To avoid your positions to be closed could be a good practice to adjust or remove your stop losses at USA market closing time, depending on the asset you're trading , for example you could be choosing to increase your SL of about 20 pips when trading EUR/USD or XAUUSD; assets including less traded currency should instead see a bigger difference in spreads, so that pour choice should be around 30/40 pips more in the SL we previously put.

Alternatively we could remove opur Stop Losses and put them back ruffly half an hour later, whens preads are usually coming back to normality.

Why are Brokers allowed to do it, is it legal?

Yes, it is, and there is nothing we/they can do about it.

Brokers receive quotes from liquidity providers through their price aggregation systems. These systems collect and consolidate prices from multiple sources, allowing brokers to offer competitive bid and ask prices to their clients. The quotes provided by liquidity providers reflect the current market conditions, including the supply and demand for each currency pair. 

This mean that brokers are committed to reflect to clients what their providers offer, and they are just applying a normal market feature; loosing money can be painful and we get that, but this is not an unfair practice from your broker, is just how market works and is much better to try use your time to understand how they works, instead of complaining to your brokers for something normal.