Spread
The spread is the difference between a currency pair’s bid price and ask price.
Full explanation
The spread is the gap between the bid price, at which a trader can sell a currency pair, and the ask price, at which the pair can be bought. It is commonly measured in pips, the standard unit for small forex price movements.
Spreads form part of the transaction cost of opening and closing a position. They may be fixed or variable, depending on the broker and account type. Variable spreads often widen when liquidity is limited or volatility rises, including around major economic releases or outside the busiest trading sessions.
Example: If EUR/USD has a bid price of 1.1800 and an ask price of 1.1802, the spread is 0.0002, or two pips.
Why traders watch it
The spread affects the cost of a forex transaction and the price movement needed before a position becomes profitable.
Trading considerations
- Major currency pairs often have narrower spreads when market liquidity is high.
- Variable spreads can widen during volatile or illiquid periods.
- The spread is separate from commissions and overnight financing charges.
Educational guidance only — never a trading signal or recommendation.
Related indicators
Liquidity
Liquidity describes how easily you can buy or sell without moving the price. Deep liquidity means tight spreads, reliable fills and orderly movement. Thin liquidity means wider spreads, slippage and sudden jumps. Liquidity varies through the day, peaking when London and New York overlap and thinning during the late Asian session, holidays and the minutes around major releases.
Slippage
Slippage is the difference between the expected price of an order and the price at which it is executed.