What Is a Spread in Forex? Bid, Ask, and the Real Cost of Trading

What is a spread?

The spread is the gap between the price your broker will buy a currency from you (the bid) and the price they'll sell it to you (the ask). Every broker quotes both prices simultaneously.

EUR/USD: Bid 1.08498, Ask 1.08510. Spread = 0.00012, or 1.2 pips. If you buy at the ask (1.08510) and immediately close at the bid (1.08498), you're already down 1.2 pips. That's the broker's compensation for providing liquidity.

Fixed vs variable (floating) spreads

Brokers price spreads in two models:

• Fixed spreads stay the same regardless of market conditions. The broker absorbs the variability. Common at smaller market-maker brokers.
• Variable (floating) spreads change with market conditions — tighter during liquid hours, wider during off-hours and news. Standard at ECN/STP brokers.

For most active traders, variable spreads are cheaper on average even though they widen unpredictably. Fixed spreads price in the worst case, so the trader pays the worst-case rate constantly.

What affects spread width

Five factors:

1. Liquidity in the underlying market — major pairs in deep liquidity windows trade at tight spreads
2. Time of day — London-NY overlap (12pm-4pm GMT) is the tightest spread window; Asian session is wider
3. News events — NFP, central bank decisions cause spreads to widen by 5-20× momentarily
4. Pair tier — majors tighter than crosses tighter than exotics
5. Broker model — ECN brokers passing through interbank rates show tighter spreads than market-makers marking up prices

What's a normal spread?

Reference numbers from 2026 (variable, peak liquidity):

If your broker shows EUR/USD at 3+ pips during peak liquidity, you're being overcharged. Switch.

ECN vs Standard accounts

The same broker often offers both account types:

• Standard account — spread-only pricing, no commission. Spreads wider (e.g., EUR/USD from 1.2 pips). Best for low-frequency traders.
• ECN / Raw Spread account — tighter spreads (0.0-0.3 pips on EUR/USD) plus per-lot commission ($2-7 per side). Total cost lower for active traders.

The breakeven point: if you trade 5+ standard lots per month on a single pair, ECN is cheaper. For under that volume, the standard account often wins on simplicity.

How spread affects strategy

Strategy choice is partially driven by spread:

• Scalping (50-100 trades per day) only works with very tight spreads — every pip of spread comes off your edge directly. ECN accounts mandatory.
• Day trading (5-15 trades per day) tolerates 0.5-1.5 pip spreads. Standard accounts can work.
• Swing trading (holding days to weeks) — spread is a small fraction of expected move; almost any spread works.
• Position trading (months) — spread is rounding error. Focus on swap costs instead.

Hidden ways spread costs you

Beyond the obvious entry/exit cost, spread affects trading in subtle ways:

• Stop losses fill at the bid when you're long. If you set a stop at 1.0800 on a long EUR/USD position, the stop triggers when the bid reaches 1.0800 — meaning the ask is already at 1.08012, and your effective stop was 1.2 pips worse than you thought.
• Trailing stops are calculated from the ask if long. Wider spreads mean your trailing stop trails further away from price.
• Risk-to-reward calculations need to account for spread. A 20-pip target after a 1.5-pip spread costs you 7.5% of expected profit.

Frequently asked questions

Why does my spread widen at certain times?

Liquidity drops outside the London-NY overlap, and around news events. Brokers widen spreads to compensate for execution risk.

Is a zero-spread account a scam?

Not necessarily. 'Zero-spread' ECN accounts charge commission instead, which is typically a better deal. 'Zero-spread' standard accounts are usually marketing — there will be commission or some other cost.

How do I compare two brokers' spreads?

Look at the published Live Spreads page during London-NY overlap. Calculate total cost including commission. The broker with the lowest total cost wins.