Spread

What is a spread?

The spread is the gap between the two prices a broker quotes for any tradable instrument: the bid price (what you receive when you sell) and the ask price (what you pay when you buy). That gap is how many brokers earn money on every trade — instead of charging a separate fee, they simply quote a slightly worse price than the true market rate on each side.

Spreads are almost always expressed in pips, the standard unit of price movement in forex, which makes costs easy to compare across pairs and brokers regardless of the actual price level.

A worked example

Suppose a broker quotes EUR/USD as:

• Bid: 1.0850
• Ask: 1.0851

The spread here is 0.0001, or 1 pip. If you open a buy trade at 1.0851, the position is immediately down 1 pip the instant it’s filled, because you’d only receive 1.0850 if you closed it right away. The price has to move at least 1 pip in your favor just to break even.

On a standard lot (100,000 units), where a pip is worth roughly $10, that 1-pip spread is effectively a $10 cost on the trade. On a micro lot, the same 1-pip spread costs about $0.10. Spread cost scales directly with position size, just like pip value does.

Why the spread matters

Because the spread is paid on every single trade, it directly affects profitability — especially for short-term and high-frequency strategies like scalping, where dozens of trades a day can accumulate meaningful spread costs even if each one is small. Wider spreads mean the market has to move further before a trade turns profitable.

Spreads are not identical across brokers, account types, or market conditions. Some brokers offer a fixed spread that stays constant, while others offer a variable spread that floats with liquidity. Some accounts charge a commission on top of a much tighter raw spread. Comparing a broker’s real, checked typical spreads — not just marketing headlines like “spreads from 0.0 pips” — is one of the most important steps when choosing where to trade.

Quick recap

• The spread is the bid-ask gap, quoted in pips, and is a core trading cost.
• A trade starts at a small loss equal to the spread, which price must first overcome.
• Spread cost scales with lot size, just like pip value.
• Always compare a broker’s typical (not just minimum advertised) spreads across the pairs you actually plan to trade.