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Trading costs

Spreads

Spreads Explained
(How They Work)

A forex spread is the difference between the bid and the ask price. It’s one of the main trading costs: you “pay” the spread when you enter a trade, because your position starts slightly negative by design.

This page explains what spreads are, when they widen, and how to compare brokers and account types without getting misled by “from 0.0 pips” marketing.

Risk warning: This content is for educational purposes only and not financial advice. Forex trading involves risk, and you can lose money.

Spreads: the cost you feel first

The spread is the “entry fee” built into every trade. Lower spreads can help, but only if execution is solid and your strategy
doesn’t rely on tiny profit targets.

  • Tight spreads: easier for scalping & short-term trades
  • Wide spreads: more cost + more noise near entries
  • Watch out: spreads widen during news and low liquidity

Rule of thumb: if your average target is smaller than the spread, you’re fighting math.

What is a spread in forex?

A spread is the gap between bid and ask. You buy at ask and sell at bid. The gap is the spread.

Bid ask spread explained

  • Bid: the price you can sell at.
  • Ask: the price you can buy at.
  • Ask is typically higher than bid, creating the spread.

How spreads affect profit

  • The market must move in your favor enough to cover the spread before you’re truly positive.
  • Short-term trades feel the spread more than longer-term trades.

When spreads widen

  • Major news events and high volatility.
  • Low-liquidity hours (quiet market times).
  • Market open/close transitions and rollover time.
Why spreads widen

Fixed vs variable spreads (quick overview)

  • Fixed spreads: the spread stays more stable, which can feel predictable for beginners.
  • Variable spreads: usually tighter in normal conditions, but they can widen during news or low liquidity.
  • What matters most: real trading hours + execution quality (slippage can outweigh a “tight” spread).
  • Beginner tip: if you trade around news, assume spreads can widen no matter what the broker advertises.
Fixed vs variable spreads

Beginner tips to reduce spread costs

  • Trade liquid pairs (majors) when their sessions are active.
  • Avoid trading right during major news until experienced.
  • Don’t scalp as a beginner; spreads punish ultra-short trades.

Related lessons

forex spreads