I’ve been watching my spreads widen a lot during big news events like NFP or Fed announcements.
I get that liquidity plays a role, but I’m still trying to wrap my head around how it all works.
News events make spreads huge because no one wants risk.
Liquidity providers avoid major news events. They reduce order sizes or withdraw since price movements are unpredictable. That causes spreads to widen. For example, EUR/USD usually has a spread of around 0.7 pips but can spike to 3-6 pips during Fed meetings. Brokers vary in how they manage this - ECN brokers often return to normal faster than market makers. If you must trade during news, consider using smaller position sizes to handle the wider spreads that can eat into your profits.
Spread is basically the broker’s cut - the gap between what buyers pay and sellers want.
News makes everyone jumpy. Big traders yank their orders because they don’t want to get burned by sudden moves. Fewer people trading = wider spreads.
I’ve watched EUR/USD spreads jump from 0.8 pips to 4-5 pips during NFP. Sometimes worse if the data’s really wild.
Don’t trade right before or during major news. Learned this the hard way when spread spikes hit my stop on what should’ve been a winner.
Spread widening during news? It’s all about big players managing risk. When major announcements drop, institutional traders bail because they can’t price the risk properly.
Brexit vote was crazy - GBP/USD spreads exploded from 1.2 pips to over 15. My broker couldn’t even find counterparties.
I’ve tracked different brokers during these events. Some get back to normal spreads in 10 minutes, others take an hour. The ones with solid liquidity connections recover way faster.
Check your broker’s spread history during past news events. Some are absolutely brutal. I actually switched brokers because their spread spikes were killing me.
Brokers increase spreads during news events out of caution. They pull back liquidity to avoid losses from sudden market moves. It’s best to wait around 30 minutes after the news release for conditions to stabilize.
Spreads widen when there is high volatility because market makers pull liquidity. They want to avoid losses from sudden price moves.
Usually back to normal in 15-30 minutes after news.