The spread is the gap between the price you buy at and the price you sell at.Quick answer: The forex spread is the difference between the bid (sell) price and the ask (buy) price of a currency pair, usually measured in pips. It is a cost you pay on every trade the moment you open it. To find its cost in money, use: spread in pips × pip value × lot size. Use the free pip calculator to get the pip value for your pair and lot size.
Key takeaways
- Every trade starts at a small loss equal to the spread, because you buy at the ask and sell at the bid.
- The same spread costs far more on a tight stop than on a wide one.
- Spreads widen during news, thin trading hours and the daily rollover.
- On a short position, your stop triggers on the ask price, but most charts show the bid, so a widening spread can stop you out without the chart touching your level.
- Compare accounts by total cost per lot (spread plus commission), not by the spread alone.
What Is the Forex Spread?
Every currency pair has two prices at any moment. The bid is the price at which you can sell the base currency, and the ask (also called the offer) is the price at which you can buy it. The ask is higher than the bid, and the difference between them is the spread. In a liquid, active market the spread tends to be narrow, while in thin or volatile conditions it tends to be wider (see this explanation of the ask price on Babypips).
Spread = ask − bid. For example, if EUR/USD shows a bid of 1.08500 and an ask of 1.08512, the spread is 0.00012, which is 1.2 pips. Most leveraged providers build their fee into the spread instead of charging a separate commission, so the spread is your main trading cost (see CMC Markets' guide to the forex spread).
If you buy at 1.08512 and the market has not moved, you could only sell at 1.08500. You are instantly 1.2 pips behind and need the market to move that far in your favor before you break even.
Spread cost in money is pips times pip value times lots.How to Calculate the Cost of the Spread
Spread cost = spread in pips × pip value per lot × lot size. For EUR/USD on a USD account the pip value is about $10 per standard lot ($1 per 0.10 lot, $0.10 per 0.01 lot). The table shows the cost for different spreads and sizes (approximate):
| Spread | 0.01 lot | 0.10 lot | 1.00 lot |
|---|---|---|---|
| 0.5 pips | $0.05 | $0.50 | $5.00 |
| 1 pip | $0.10 | $1.00 | $10.00 |
| 1.5 pips | $0.15 | $1.50 | $15.00 |
| 3 pips | $0.30 | $3.00 | $30.00 |
| 10 pips | $1.00 | $10.00 | $100.00 |
A 1.2-pip spread on 0.10 lots costs about $1.20 per trade. Do that 20 times a day and it is $24 a day, whatever the market does. To see how this cost affects the final result of a trade, run it through the forex profit calculator.
Spread-Only vs Raw Spread Plus Commission
Some accounts charge only the spread. Others offer a much lower "raw" spread and add a separate commission. The only fair comparison is the total cost per lot. This is an illustration with assumed numbers (your broker's figures will differ):
| Item | Account A: spread only | Account B: raw spread plus commission |
|---|---|---|
| Typical EUR/USD spread | 1.2 pips | 0.2 pips |
| Spread cost per lot (× $10 per pip) | $12.00 | $2.00 |
| Commission per lot (round turn) | $0 | $7.00 (assumed) |
| Total cost per lot | $12.00 | $9.00 (about 0.9 pip) |
| Cost for 20 lots a month | $240 | $180 |
In this example Account B saves $60 a month for a trader who trades 20 lots. For a trader who rarely trades, the difference is small. Always include commission, and check whether a "zero spread" claim hides a commission or another fee.
Why Spreads Widen (and When)
Spreads are not fixed numbers. They move with liquidity and volatility, and brokers can show different spreads at the same moment. Typical tendencies:
| Time or event | What usually happens to the spread |
|---|---|
| London and New York overlap | Usually the tightest, because liquidity is highest (check local times with the forex session converter) |
| Major news releases | Can widen sharply for seconds or minutes |
| Daily rollover (around 5 pm New York time) | Often wider while liquidity is thin |
| Market open on Sunday evening | Often wider until liquidity builds |
| Holidays and quiet hours | Can be wider because fewer participants are quoting prices |
| Exotic pairs | Usually wider at all times than major pairs |
These are tendencies, not guarantees. The only way to know your broker's real spreads is to record them (see below). If the spread widens dramatically while you hold a position, you can be stopped out or even receive a margin call, which is why the next section matters.
A widening gap between bid and ask raises the cost of every trade.The Phantom Stop-Out
Here is something many traders never learn: a buy position closes at the bid, but a sell position closes at the ask. That means a buy stop triggers when the bid reaches it, and a sell stop triggers when the ask reaches it. Most charts display bid prices only.
- You sell (short) EUR/USD at a bid of 1.08500 with a stop at 1.08750 (25 pips above).
- Normally the spread is 1.2 pips, so the ask is about 1.08512 and the chart's bid has to rise nearly to 1.08738 to trigger the stop.
- A news release hits and the spread widens to 8 pips. The bid rises only to 1.08700, so the chart never touches 1.08750. But the ask is now 1.08780, above your stop.
- Your stop triggers and you buy back at about 1.08780, a loss of 28 pips instead of 25.
On the chart it looks like the broker stopped you out for nothing. In reality the widened spread pushed the ask through your stop. This is why wide spreads matter even if you never pay attention to them, and why you should avoid holding tight stops through news. Risk may also exceed what you planned, so size positions with the forex position size calculator and leave room for the spread when you place the stop with the stop loss calculator.
Spread Cost by Stop Distance
The spread matters most when your stop is tight. Here is the cost of a 1.2-pip spread expressed in R (your risk per trade):
| Stop distance | Spread cost in R | Share of your risk |
|---|---|---|
| 10 pips | 0.120R | 12.0% |
| 25 pips | 0.048R | 4.8% |
| 50 pips | 0.024R | 2.4% |
| 100 pips | 0.012R | 1.2% |
A 10-pip stop gives away 12% of your risk to the spread, while a 100-pip stop gives away about 1%. That is why spread decides the fate of many scalping systems (see our scalping strategy guide) but barely matters for slower styles such as swing trading. When you backtest, always subtract the spread, as explained in our forex backtesting guide.
Spreads can widen sharply around major news releases.How to Reduce Spread Costs
- Trade liquid pairs. Majors usually have the tightest spreads.
- Trade liquid hours. The London and New York overlap is often the cheapest window.
- Avoid entries at news time and rollover. Wait until the spread normalizes.
- Use wider stops with smaller sizes if your strategy allows it, so the spread is a smaller share of your risk.
- Trade less often. Fewer trades mean fewer spreads.
- Compare total cost per lot between accounts, including commission.
- Use limit orders where it makes sense, but be aware they may not be filled.
Compare accounts on total cost per lot, not on the headline spread.Track Your Real Spreads in a Journal
Your broker's advertised spread is an average. Add a Spread at entry column to your trading journal and note the spread each time you open a trade. After a few weeks you will see which hours and pairs cost you the most. The free trading journal calendar is a quick place to log trades, and a spreadsheet works just as well.
7 Spread Mistakes
- Ignoring the spread in backtests. It turns paper profits into real losses.
- Choosing an account by spread alone. Commission changes the real cost.
- Trading news with tight stops. A widening spread can stop you out early.
- Assuming a fixed spread. Spreads move all day.
- Trading exotic pairs like majors. Their spread can swallow a small target.
- Overtrading. Every trade pays the spread again.
- Not recording actual spreads. You cannot manage what you do not measure.
Log the spread at entry to learn which hours and pairs cost the most.Frequently Asked Questions
What is the spread in forex?
The spread is the difference between the bid (sell) price and the ask (buy) price of a currency pair. It is usually measured in pips and is the main cost of most forex trades.
How do you calculate the spread in forex?
Subtract the bid from the ask. For example, 1.08512 minus 1.08500 is 0.00012, which is 1.2 pips. To get the cost in money, multiply the spread in pips by the pip value and the lot size.
What is a good spread in forex?
It depends on the pair and the time. Major pairs usually have the tightest spreads, and exotic pairs are wider. Compare your broker's total cost per lot, including commission, rather than chasing the lowest headline number.
Why do spreads widen during news?
Liquidity providers pull back or quote wider prices when the outcome of a release is uncertain, so the gap between bid and ask grows until conditions settle.
Is a fixed spread better than a variable spread?
Neither is always better. Fixed spreads are predictable but may be wider on average. Variable spreads can be tighter in calm markets and much wider during news. Check the terms and test on a demo account.
Do I pay the spread when I close a trade?
The spread is built into the prices: you buy at the ask and sell at the bid, so you pay it once as the difference between your entry and exit prices. Some accounts also charge commission on both sides.
Can a wide spread stop me out?
Yes. A sell position's stop triggers on the ask price, so if the spread widens enough, the ask can reach your stop even when the chart's bid price does not.
Conclusion
The spread is small on every single trade and large over hundreds of them. Measure it in money and in R, compare accounts by total cost per lot, and avoid tight stops around news. Start with the pip calculator, then explore the rest of the free forex trading tools to size, cost and review every trade.
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Risk disclaimer: This article is for educational purposes only and is not financial advice. Examples, spreads and commission figures are assumed illustrations, not quotes from any broker and not expected results. Leveraged trading is high risk and you can lose some or all of your money; the CFTC also warns that margin trading can leave you responsible for losses greater than your deposit (see the CFTC forex advisory). Only trade with money you can afford to lose.
Last updated: October 18, 2026
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