Spread
The difference between the bid and ask price. A key trading cost in forex and CFD markets.
The spread is the difference between the buy and sell price - the cost of entering a trade. A 1-pip spread on EUR/USD costs about $10 per standard lot round trip.
The spread is the difference between the bid (sell) price and the ask (buy) price of a trading instrument. It represents a key cost of trading and is how brokers often make money. Tighter spreads mean lower trading costs. Brokers widen spreads in fast markets and on exotic pairs, and some charge a commission instead of a spread, the raw pricing model. The spread plus any commission is your real entry cost, which is why a zero-pip spread claim usually hides a commission.
How It Works
- Bid: 1.1000 / Ask: 1.1002 = 2 pip spread
- You buy at ask, sell at bid
- Spread is an immediate cost when entering a trade
- Variable spreads widen during volatility
Types of Spread
Fixed Spread
Stays constant regardless of market conditions
Variable Spread
Fluctuates based on liquidity and volatility
Raw Spread
Interbank spread with separate commission
Trading Tips
Compare spreads across brokers
Spreads widen during news events and low liquidity
Major pairs have tighter spreads than exotics
Related Terms
Sources
- InvestopediaBid-ask spread explained
- BabyPipsSpreads in the forex course
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