What it is — Spread in Forex
Every forex quote shows two prices: the bid (what buyers pay) and the ask (what sellers want). The difference between them is the spread — and for most brokers, it is how they make money.
When you open a trade, you start with a small negative P/L equal to the spread. That's not a bug; it's the transaction cost being collected up front. Spreads are measured in pips and vary by broker, pair, and market conditions.
Why it matters — Spread in Forex
- It is a real, recurring cost. Trade 10 times a week at 1.2 pips and you pay 12 pips weekly — $120 on a standard lot — before commissions and swap.
- It widens when risk rises: around major news (NFP, CPI), at the 5pm ET rollover, and in thin sessions.
- Pricing models differ: “raw spread + commission” accounts show near-zero spreads and charge ~$6–7 per lot round turn — often cheaper overall for active traders.
What the spread costs you, in dollars
EURUSD quoted 1.12294 / 1.12304 has a 1.0-pip spread. Buy one standard lot and close it a second later: you bought at the ask, sold at the bid, and paid that 1 pip — $10 — for the round trip. Same trade on an exotic with a 3-pip spread: $30. Spread is a cost you pay on every entry, so it compounds with frequency: a scalper taking ten trades a day at 1 pip on one lot pays ~$100 a day to the spread alone. Wider-spread pairs need wider targets or fewer trades — the arithmetic does not care about your strategy’s story.
Why spreads widen at the worst moments
Spreads are not constants. They widen in three predictable windows: the daily rollover around 21:00–22:00 UTC when liquidity thins, just before high-impact news when makers pull quotes, and in the dead hours between session closes — a 0.8-pip EURUSD spread can briefly become 3+ pips. This is why trading through a red calendar event costs twice: the spread you cross entering and the slippage exiting. Check the economic calendar before you trade, and the session dashboard to see when liquidity is actually home.
Frequently asked questions — Spread in Forex
Why do forex spreads widen?
Three main triggers: high-impact news (liquidity providers pull quotes), the daily 5pm ET rollover, and low-liquidity hours or exotic pairs. Wider spread = higher uncertainty or thinner order flow.
Is a lower spread always better?
Not automatically. Some accounts charge $0 spreads plus commission per lot — compare total round-trip cost, not the spread line. Execution quality during news matters more than half a pip on a quiet Tuesday.
What is a typical EUR/USD spread?
On decent accounts, roughly 0.6–1.5 pips outside news windows, widening at rollover and around releases. Exotics run several pips wide — price that into any plan that holds them overnight.
What is a raw spread account?
An account where the broker passes through near-interbank spreads (often 0.0–0.3 pips on majors) and charges a fixed commission instead — typically about $3.5 per lot per side. Frequent traders often save versus standard accounts.