Spread

What Is Spread in Forex? Definition, Types, and How It Affects Your Trades

Definition:

In Forex trading, the spread is the difference between the bid price (buy) and the ask price (sell) of a currency pair.

Explanation:

The spread represents the broker’s fee and is a key component of trading costs. For example, if EUR/USD has a bid price of 1.1000 and an ask price of 1.1002, the spread is 2 pips.

There are two main types of spreads:

Fixed Spread: Remains constant regardless of market conditions. Often offered by dealing desk brokers.
Variable (Floating) Spread: Changes depending on market volatility and liquidity. Common in ECN and STP accounts.

Spreads tend to widen during high-impact news releases, off-hours, or in volatile market conditions. Traders should always consider the spread when calculating their break-even and potential profit.

Example:

You buy EUR/USD at 1.1002 and the bid price is 1.1000. Even if the market doesn’t move, you start with a 2-pip loss due to the spread.

Category:

Trading / Broker Mechanics

FastPip Tip:

Tight spreads mean lower trading costs—especially important for scalpers and day traders. Choose brokers with reliable execution and minimal spread fluctuations.