I’ve been trading for a little while, but I keep running into the term ‘spread’ and I’m still a bit confused.
Is it simply the gap between buy and sell prices, or is there more depth that impacts my trades?
It’s the cost to enter a trade. Tighter spreads mean you save more in the long run.
Just the gap between bid and ask prices.
Spread is the gap between buy and sell prices for currency pairs. For example, if EUR/USD is bid at 1.0850 and ask at 1.0852, that’s a 2-pip spread you’ll pay every time you trade. Tighter spreads mean lower trading costs. Good brokers usually offer spreads below 1 pip on major pairs, while exotic pairs can have spreads over 10 pips. Be cautious; spreads can widen during news events and periods of low liquidity. If you’re scalping in those conditions, your profits may vanish quickly.
Yeah, it’s the gap between bid and ask prices. Here’s what you need to know for trading.
You’re instantly down by the spread when you open a position. EUR/USD has a 1.2 pip spread? You need 1.2 pips just to break even.
Multiple trades per day? This gets expensive fast. I learned the hard way - made decent calls but spread costs killed my profits.
Watch spreads during different sessions. Asian session can double your costs compared to London/NY overlap. My usual 0.8 pip EUR/USD spread hit 2.5 pips at 3 am.
Swing trading for days? Spread doesn’t matter much. Day trading? Those extra 0.5 pips per trade become real money fast.
Spreads represent the cost to enter a trade. You start below market price right away.
Brokers profit from spreads, so choose one with reasonable spreads for your trades.
Variable spreads can be surprising compared to fixed ones, but they tend to be tighter when the market is active.