How the spread works

Every forex quote has two prices:

  • Bid: the price at which you can sell.
  • Ask: the price at which you can buy.

The ask is always higher than the bid. The gap between them is the spread, and it is how many brokers are paid. Because you buy at the higher price and sell at the lower one, every trade starts slightly negative by the size of the spread.

Fixed and variable spreads

Some accounts have variable (floating) spreads that change with market conditions. They are often very tight on major pairs during busy hours, but can widen sharply around news releases or when markets are quiet. Other accounts advertise fixed spreads, which are usually wider on average.

Why it matters

If you trade often, spreads add up. A 1.5-pip spread on a standard lot of EUR/USD costs about $15 per trade. Compare spreads together with any commission: a "raw spread" account with a commission can cost more or less than a "standard" account with no commission.