Glossary
Spread
The gap between the bid and ask price — the built-in cost of opening a trade.
Spread, explained
The spread is the difference between the buy (ask) and sell (bid) price, usually measured in pips. On a liquid major like EUR/USD it can be a fraction of a pip; on exotics or during thin conditions it widens considerably.
Because you enter at one side and exit at the other, the spread is a cost you pay on every round trip. It is small per trade but compounds heavily for high-frequency or scalping styles, where the spread can quietly eat a large share of the gross edge.
Spreads come in two flavours. Fixed spreads stay constant regardless of conditions, while variable (floating) spreads tighten when liquidity is deep and widen when it is thin. Most ECN-style accounts use raw variable spreads plus a separate commission, which is usually cheaper overall for active traders.
Spreads widen around news releases and during illiquid sessions, which is one reason disciplined traders avoid entering market orders into a release — the cost and slippage can dwarf the edge. A spread that is 0.6 pips in the London session can briefly blow out to several pips at the moment of a high-impact number.
On the desk we factor spread into both entry timing and stop placement. We prefer to trade liquid pairs in active sessions, and we treat the spread as part of the risk on tight scalps, since a wide spread can convert a winning idea into a losing fill.
Frequently asked questions
- What is a good spread in forex?
- On major pairs like EUR/USD a spread under about 1 pip (or near 0 plus commission on raw accounts) is competitive. Exotics naturally carry much wider spreads because they are less liquid.
- Why does the spread suddenly widen?
- Spreads widen when liquidity thins out — around major news releases, at session opens and closes, over the weekend gap, and during volatile spikes. Avoiding market orders at those moments limits the extra cost.
Related terms
Bid / Ask
The two sides of a quote — the bid is where you can sell, the ask is where you can buy; the gap between them is the spread.
ReadLiquidity
The pools of resting orders price is drawn toward — typically clustered above highs and below lows.
ReadSlippage
The difference between the price you expected and the price you actually got on a fill.
ReadSwap
The interest charged or earned for holding a forex position open overnight.
Read
Put it into practice
Education modules
More terms in the glossary.
Vocabulary is the easy part. See how the desk turns these concepts into structured trades with defined risk on every position.