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Beginner’s Guide7-minute read

What Is Spread in Forex Trading?

The spread is one of the most important trading costs to understand before opening a forex position. This guide explains bid and ask prices, how spreads are calculated, why they change, and how they affect your trade from the moment it is opened.

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Currency pair example

EUR / USD

Market Open

Sell Price

1.08500

BID

Buy Price

1.08515

ASK

Difference between prices

1.5 pips

This difference is the

Spread

Core Definition

What Is a Spread in Forex Trading?

The spread is the difference between the bid price and the ask price of a financial instrument. In forex, it represents one of the main costs of entering and exiting a currency trade.

A trading platform displays two prices for every market. The higher price is normally the price at which you can buy, while the lower price is the price at which you can sell. The gap between these two quotes is the spread.

In simple terms: if EUR/USD can be bought at 1.08515 and sold at 1.08500, the 0.00015 difference equals a spread of 1.5 pips.

Bid

Sell Price

The price available when you sell the instrument.

Ask

Buy Price

The price available when you buy the instrument.

Spread

Price Difference

The gap between the current bid and ask prices.

Spread Calculation

How Is the Forex Spread Calculated?

The spread is calculated by subtracting the bid price from the ask price. The result is then expressed in pips or points, depending on the instrument and the number of quoted decimal places.

Spread = Ask Price − Bid Price

Ask price

1.08515

BUY

Bid price

1.08500

SELL

Spread

1.5

PIPS

Calculation steps

1

Subtract the bid price of 1.08500 from the ask price of 1.08515.

2

The price difference is 0.00015.

3

For EUR/USD, this difference is equal to 1.5 pips.

Practical Example

How Does the Spread Affect a Forex Trade?

Assume you open a one-standard-lot position on EUR/USD and the pip value is approximately $10. If the quoted spread is 1.5 pips, the spread cost is approximately $15.

Position size

1 lot

Pip value

$10

Spread

1.5 pips

Spread cost

$15

💡

What happens when the trade opens?

The position will normally begin with an unrealised loss of approximately $15 because of the spread. The market must move around 1.5 pips in your favour before the trade reaches break-even, excluding commissions, slippage, and financing costs.

When opened

-$15

→

After a 1.5-pip move

$0

Spread Types

What Are the Main Types of Forex Spread?

Forex brokers generally offer variable or fixed spreads. Each pricing model behaves differently, and neither option is automatically better for every trader, strategy, or market condition.

Variable Spread

Most common

Floating Spread

+

A variable spread changes with market liquidity and volatility. It can remain very low during active trading hours but may widen sharply during major news releases or thin market conditions.

  • ✓Often tighter in highly liquid markets.
  • ✓May widen during economic announcements.
  • ✓Common on raw-spread and professional accounts.

Fixed Spread

More predictable

Fixed Pricing

+

A fixed spread normally stays at a predefined level under standard market conditions, helping traders estimate transaction costs before placing an order.

  • ✓Trading costs are easier to estimate.
  • ✓May be wider than variable pricing in normal markets.
  • ✓Broker conditions may still apply during extreme volatility.

Market Conditions

Why Do Forex Spreads Widen?

Spreads do not always remain at the same level. Variable spreads can widen when liquidity falls, volatility rises, or prices move too quickly for normal market quotes to remain stable.

📰

Economic News

+

Spreads may widen before and after major inflation, interest-rate, employment, and central-bank announcements because prices can move rapidly.

🌙

Low Liquidity

+

When fewer buyers and sellers are active, the gap between available bid and ask prices may become wider.

📈

High Volatility

+

Fast-moving markets make order execution more difficult, which can increase the difference between buying and selling prices.

🕒

Market Open and Close

+

Spreads can be wider around the weekly market open, late trading sessions, holidays, and periods between major sessions.

💡

Market example

How can the spread widen?

+

Normal market

Good liquidity and stable pricing

0.8 pips

During major news

Higher volatility and lower liquidity

4.5 pips

Choosing an Account

What Is Considered a Good Forex Spread?

There is no single spread that is good for every market. A competitive spread depends on the currency pair or instrument, account type, trading session, liquidity, commission structure, and broker pricing model.

Major Currency Pairs

Usually tighter

+

Pairs such as EUR/USD and USD/JPY often have lower spreads because they attract high trading volume and liquidity.

Minor and Exotic Pairs

Usually wider

+

Less actively traded currency pairs often have lower liquidity, which can lead to higher transaction costs.

Gold, Indices and CFDs

Varies by instrument

+

Spreads on gold, stock indices, commodities, and CFDs should not be compared directly with standard forex-pair spreads.

Before choosing a low-spread broker

✓Check the broker’s average spread, not only its advertised minimum.
✓Review any separate commission charged on raw-spread accounts.
✓Compare trading costs during different sessions and market conditions.
✓Consider regulation, execution quality, slippage, and withdrawal policies.
Best Low-Spread BrokersBrowse Broker Reviews

Trader Questions

Frequently Asked Questions About Forex Spreads

Is the spread the same as a trading commission?+
Not always. The spread is the difference between the bid and ask prices, while a commission is a separate fee that may be charged when opening or closing a trade. Some accounts charge only a spread, while raw-spread accounts may combine tighter spreads with a separate commission.
Is the spread charged as soon as I open a trade?+
The effect of the spread appears immediately after a position is opened. This is why a new trade normally begins with a small unrealised loss equal to the difference between the entry and exit prices.
Why do forex spreads widen during news events?+
Major announcements can cause rapid price changes and lower available liquidity. Brokers and liquidity providers may therefore quote a wider difference between the best bid and ask prices.
Does a low spread automatically mean a broker is better?+
No. A low spread is valuable, but traders should also review regulation, commissions, execution quality, slippage, withdrawal policies, platform stability, and customer support.
What is the difference between a spread and a pip?+
A pip is a unit used to measure a price movement. The spread is the difference between the bid and ask prices, and it is commonly expressed in pips.
Does spread matter for long-term traders?+
Yes, although it usually has a greater impact on day traders, scalpers, and other traders who open many short-term positions. For longer-term trades, financing costs and market movement may have a larger overall effect.
Continue Learning

Trading Concepts Related to Spread

Understanding lot size, leverage, and margin will help you calculate trading costs, control position size, and manage risk more effectively.

What Is a Lot in Forex?

Learn how forex lot sizes work and how position size affects profit, loss, and risk.

→

What Is Leverage?

Understand how leverage works, why traders use it, and the risks of leveraged trading.

→

What Is Margin?

Learn the difference between used margin, free margin, and margin level.

→
Next Step

Compare Forex Brokers Before Opening a Live Account

Compare regulation, spreads, commissions, account types, execution conditions, deposits, and withdrawals before choosing a forex broker.

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