Five-digit or four-digit quotes, what to choose for forex trading

Recently, many forex brokers have emerged that offer their clients the opportunity to trade on the foreign exchange market using five-digit quotes.

For this reason, some traders are interested in the difference between five-digit and four-digit quotes.

The first obvious difference is that in a five-digit quote, one standard pip equals 10.

For example, if you're trading a currency pair with a spread of 2 pips, you'll see the number 20 in the terminal.

To identify other differences and evaluate the advantages and disadvantages of the two currency quote delivery options, let's compare two account types with different quote delivery options.

Before testing, I'd like to point out that the exchange itself doesn't have a concept of a 5-digit quote; it's a brokerage innovation for the "convenience" of clients. It's no coincidence that many brokers display the fifth digit after the decimal point at half the size of the others.

Five-digit quotes – advantages and disadvantages:

1. Displaying the slightest trend changes – essentially, you get information on tick movements. While not very useful in practical terms, it can be useful for analysis. This advantage can also be considered a disadvantage, as such detailed display of the slightest price fluctuations only hinders your work.

2. Setting stops – almost every brokerage company has a minimum level for stop-loss, take-profit, and trailing stop orders. However, when using a five-digit quote, these values ​​are reduced tenfold.

In other words, if previously you couldn't set a stop-loss closer than 10 pips to the current price, now those 10 have become a standard 1 pip. This is quite convenient when using some forex trading strategies.

3. Minimum deviation – when working with DCs that practice market execution, you need to set a deviation (acceptable slippage) when opening a new position. Typically, it can't be set below 1 standard pip, and with a 5-digit quote, this value changes to 0.1 standard pip.

4. Scalping Application – The 5-digit quote is ideal for scalping trading, especially when dealing with large volumes and very short trades. For example, when opening a 10-lot position, one pip of trend movement represents approximately $100.

And with a slow trend, you can close trades with a profit of literally 0.5 standard pips or 5 pips on a five-digit quote.

Considering the disadvantages of five-digit quotes, one main drawback is the difficulty of perception: the rate constantly changes, often with sharp fluctuations. It seems like there's high market activity, but in reality, the price has only changed a couple of pips.

So there is a high probability that some scripts ( advisors , indicators) will not work on such accounts.

If you're just starting out, you might not notice much of a difference, but those more accustomed to 4-digit quotes will find it difficult to adjust at first, as you'll constantly have to mentally discard the last digit.

Recently, more and more stock brokers have been switching to five-digit quotes, thereby eliminating the problem of choice. This means that most accounts now come with five digits by default.