Costs, Spreads & FeesBid-Ask SpreadDealing Spread
Spread
The difference between the bid and the ask price, and the most common way a forex broker is paid.
What Spread means
The spread is the gap between the price at which a trader can sell, the bid, and the price at which they can buy, the ask. It is quoted in pips or points and is paid the instant a position is opened, because a new trade is immediately valued at the price it would be closed at. A position therefore starts life showing an unrealised loss equal to the spread multiplied by the pip value and the number of lots, before the market has moved at all.
Economically the spread compensates whoever is providing the price for inventory risk and for the possibility of trading with a better-informed counterparty. Its size reflects liquidity and volatility: the most heavily traded major pairs quote fractions of a pip during the London and New York overlap, while exotic pairs, thin sessions and the minutes around scheduled data can be many multiples of that. Brokers may pass through a raw institutional spread and charge commission separately, or add a markup and advertise commission-free trading.
For active traders the spread usually dominates the cost of trading, and its impact scales with turnover rather than with account size: a strategy taking many small profits can spend a large share of its gross edge on it, while a position trader holding for weeks will care far more about swap. Comparing brokers on advertised typical spreads alone is unreliable, since averages hide the widening that occurs precisely when trades tend to be placed.
Worked example
EUR/USD quoted 1.08505 bid and 1.08515 ask has a 1.0 pip spread, which costs about USD 10 on a standard lot of 100,000 units, deducted the moment the position opens.
Related terms
- Bid PriceThe price at which the market will buy the base currency from you - the lower of the two quoted prices.
- Ask PriceThe price at which the market will sell the base currency to you - the higher of the two quoted prices.
- Variable SpreadA spread that changes continuously with market liquidity and volatility rather than being held constant.
- Fixed SpreadA spread the broker holds constant under normal conditions regardless of underlying market liquidity.
- Total Cost of TradingThe complete cost of a trade or account, combining spread, commission, swap, slippage and non-trading fees.
Frequently asked questions
What does Spread mean in forex trading?
The difference between the bid and the ask price, and the most common way a forex broker is paid.
How does Spread work in practice?
Economically the spread compensates whoever is providing the price for inventory risk and for the possibility of trading with a better-informed counterparty. Its size reflects liquidity and volatility: the most heavily traded major pairs quote fractions of a pip during the London and New York overlap, while exotic pairs, thin sessions and the minutes around scheduled data can be many multiples of that. Brokers may pass through a raw institutional spread and charge commission separately, or add a markup and advertise commission-free trading.
What is an example of Spread?
EUR/USD quoted 1.08505 bid and 1.08515 ask has a 1.0 pip spread, which costs about USD 10 on a standard lot of 100,000 units, deducted the moment the position opens.
Trade with a regulated broker
Understanding the terminology is the cheap part. The expensive part is choosing a counterparty whose execution, financing and withdrawal behaviour match what the marketing implies. Every broker below has been reviewed with a funded live account, and each review states which legal entity and which regulator applies to the account you would actually open.
Check the licence on the regulator's own register before you deposit — our regulators directory explains what each authority enforces, from leverage caps to compensation limits.