The difference between the bid (sell) price and the ask (buy) price of a currency pair. The spread is the primary cost of making a trade.
What Is the Spread?
The spread is the gap between the Bid Price and the Ask Price of a currency pair. When you see EUR/USD quoted at 1.0850/1.0852, the spread is 2 Pips. You always buy at the higher ask price and sell at the lower bid price, so the spread is a cost you pay on every trade.
Types of Spreads
Brokers offer two main spread types. Fixed spreads stay the same regardless of market conditions and are common with market-maker brokers. Variable (floating) spreads change based on liquidity and volatility. ECN and STP brokers typically offer variable spreads that can be extremely tight during peak hours (EUR/USD under 0.5 pips) but widen during news events or low-liquidity periods.
Calculating Spread Cost
The dollar cost of the spread depends on your Lot size. For a standard lot of EUR/USD with a 1-pip spread, you pay $10 in spread cost. For a micro lot, it is $0.10. You can use our Pip Value Calculator to calculate the exact cost. Lower spreads mean lower trading costs, which matters significantly for active traders and scalpers.
Related Terms
Bid-Ask Spread
The difference between the bid price and the ask price. The bid-ask spread is the transaction cost of executing a round-trip trade.
Pip
The smallest standard unit of price movement in a currency pair. For most pairs, one pip equals 0.0001. For JPY pairs, one pip equals 0.01.
Ask Price
The price at which the market (or broker) is willing to sell a currency pair to you. You buy at the ask price. Also called the offer price.
Bid Price
The price at which the market (or broker) is willing to buy a currency pair from you. You sell at the bid price.
Slippage
The difference between the expected fill price and the actual fill price of an order. Slippage occurs when market conditions change during order execution.
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