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Tradin®

Spreads

In short

The spread is the gap between the buy price and the sell price. It is the core cost of trading, and it is why every new position starts slightly in loss.

Every instrument shows two prices at the same time.

PriceWhat it isWhich one
Ask priceThe price you get when you buyAlways the higher price
Bid priceThe price you get when you sellAlways the lower price

Spread = ask price less bid price

A worked example

On EUR/USD, the ask is 1.1053 and the bid is 1.1050. The spread is 0.0003, which is 3 pips.

How it affects your trade

The spread is your cost to enter the market. You buy at the higher ask price, and to close you have to sell at the lower bid price, so every trade starts at a small negative value equal to the spread. The price must move in your favour by that much before you reach break even. Anything after that is profit. With a 3 pip spread, the price has to rise 3 pips just to cover opening the position.

Spreads are variable

FactorEffectWhy it matters
How heavily traded the instrument isTighter. Popular instruments like EUR/USD have smaller spreads because of high volumeLower cost to trade
Time of dayTighter during busy hours, such as the London and New York overlapFaster execution and lower cost
Major newsWider. Volatility around announcements widens spreads quicklyHigher cost and higher risk in unpredictable moments

Spreads by account

A Raw account offers spreads from 0.0 pips plus a small commission per lot. Standard and Swap Free carry a wider variable spread and no commission on forex or metals.

Published spreads are starting points. The figure that will actually apply to your trade is the one in MetaTrader 5 at that moment.

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