What is a spread?
When a price for a market is quoted, there are two prices.
The first price, known as the bid, is the sell price and the second price is the buy price, known as the offer.
The difference between the sell and buy price is called the spread.
Every market has a spread and so does forex. A spread is simply defined as the price difference between where a trader may purchase or sell an underlying asset. Traders that are familiar with equities will synonymously call this the Bid: Ask spread.
What is a spread on Forex?
- Spreads are based on the buy and sell price of a currency pair
- Costs are based on forex spreads and lot sizes
- Forex spreads are variable and should be referenced from your trading platform.
It’s important for traders to be familiar with FX spreads as they are the primary cost of trading currencies. How forex spreads work, and how to calculate costs and keep an eye on changes in the spread to maximize your trading success.