What is the Spread in Forex Trading?
The spread is the difference between the bid price (what you sell at) and the ask price (what you buy at) for any tradable instrument. It represents the most immediate cost of entering a trade.
How It Works
If EUR/USD is quoted at 1.1050 / 1.1052, the bid is 1.1050 and the ask is 1.1052. The spread is 2 pips (or 0.2 pips on a raw account with commission). The moment you open a position, you're already down by the spread amount. Spreads can be fixed (stays the same regardless of market conditions) or variable (widens during low liquidity or high volatility). Most brokers offer variable spreads because they reflect actual interbank pricing. Major pairs like EUR/USD typically have the tightest spreads because they have the highest liquidity. Exotic pairs and crypto CFDs tend to have wider spreads due to lower market depth.
Why It Matters
The spread is a direct cost on every trade. For scalpers making dozens of trades per day, even a 0.5-pip difference in spread can significantly impact profitability. Comparing effective spreads (spread plus commission) across brokers is worth the time for any trader.
Common Mistake
Comparing raw spreads without factoring in commission. A 0.0-pip raw spread with $7 round-turn commission can cost more than a 0.8-pip standard spread with no commission. Total cost per trade is the number that matters.
Example
On a raw spread account, EUR/USD might show a 0.1-pip spread plus $3.50 commission per side. On a standard account, the same pair might show a 1.2-pip spread with no commission. The total cost is similar, just packaged differently.
Stoic Insight
Epictetus: 'It's not what happens to you, but how you react to it.' The spread is a fixed cost of participation. Resenting it changes nothing. Factoring it into your plan before you trade is the disciplined response.
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