Definition

The spread in forex is the difference between the bid price (price you can sell at) and the ask price (price you can buy at). It represents the broker’s visible transaction cost for executing a trade instantly.

How Spread is Calculated

Spread = Ask Price − Bid Price. It is usually measured in pips.

Example

Types of Spread

• Fixed Spread — stays the same regardless of market volatility.
• Variable (Floating) Spread — changes based on market conditions and liquidity.

Why Spread Matters

• Lower spreads reduce trading costs, especially for scalpers and day traders.
• High spreads can eat into profits or increase losses.
• Spreads often widen during news events or low liquidity periods.

Practical Tips

• Choose brokers with low spreads for your trading style.
• Avoid trading during major news if you want to prevent spread spikes.
• Always factor spread cost into your risk and profit calculations.

Common Mistakes

• Ignoring the impact of spreads on small trades.
• Scalping with high-spread brokers.
• Assuming spreads are the same 24/5 — they often widen at market open/close.

Quick FAQ

Q: Can spreads be zero?
A: Some brokers offer zero-spread accounts, but they usually charge a commission per trade.

Q: Why do spreads widen during news?
A: Liquidity drops and volatility rises, so brokers adjust spreads to manage risk.