What Is Spread in Forex Trading?
Learn what the spread is in forex trading, how it affects trading costs, why spreads vary between brokers, and how choosing lower spreads can improve your overall trading performance and profitability.
Updated
July, 2026
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- A forex spread is the difference between the bid and ask price.
- Lower spreads reduce trading costs and improve potential profitability.
- Major currency pairs usually have the tightest spreads.
- Spreads widen during high market volatility and major news events.
- Choose regulated, low-spread brokers for cost-effective forex trading.
The spread is one of the most important concepts every forex trader should understand before placing a trade. Whether you’re trading EUR/USD, GBP/USD, gold (XAU/USD), or cryptocurrencies, the spread represents the cost of entering a trade.
Many beginner traders focus on leverage, lot size, or trading strategies while overlooking spreads. However, even a profitable strategy can become unprofitable if trading costs are too high.
In this complete beginner-friendly guide, you’ll learn what a spread is in forex trading, how it works, the difference between fixed and variable spreads, how spreads affect your profits, and how to choose the best low-spread forex broker in 2026.
Example short version:
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What Is Spread in Forex Trading?
A spread is the difference between the bid price (selling price) and the ask price (buying price) of a currency pair.
Simply put, the spread is the fee you pay to open a trade.
Every time you enter a forex trade, your position starts with a small unrealized loss equal to the spread. The market must move in your favor by at least the spread amount before your trade becomes profitable.
Example
EUR/USD prices:
- Bid: 1.1050
- Ask: 1.1052
The spread is:
Spread:
2 pips
How Does a Spread Work?
Forex brokers quote two prices:
- Bid Price – Price at which you can sell.
- Ask Price – Price at which you can buy.
The difference between these prices is the spread.
When you buy EUR/USD:
- You enter at the Ask price.
- You exit at the Bid price.
This difference represents the broker’s primary trading cost on many account types.
Bid Price vs Ask Price
Understanding bid and ask prices is essential.
| Bid Price | Ask Price |
|---|---|
| Price you sell at | Price you buy at |
| Lower price | Higher price |
| Used when closing buy trades | Used when opening buy trades |
Example
EUR/USD:
- Bid: 1.1200
- Ask: 1.1201
Spread:
1 pip
Every forex quote includes both prices.
Types of Forex Spreads
Forex brokers generally offer two types of spreads.
1. Fixed Spread
A fixed spread remains constant regardless of market conditions.
Benefits
- Predictable trading costs
- Easier for beginners
- Useful during normal market conditions
Drawbacks
- Usually slightly wider than raw spreads
- May not reflect true market pricing
2. Variable (Floating) Spread
Variable spreads change based on market liquidity and volatility.
During active trading hours:
- Spreads are usually very low.
During major news events:
- Spreads may widen significantly.
Benefits
- Lower average trading costs
- Better for experienced traders
- Ideal for scalping and day trading
Drawbacks
- Costs are unpredictable
- Can widen dramatically during volatile markets
Fixed vs Variable Spread
| Fixed Spread | Variable Spread |
|---|---|
| Constant | Changes with market conditions |
| Predictable | Can widen or tighten |
| Good for beginners | Preferred by professional traders |
| Higher average cost | Lower average cost |
Many ECN and Raw Spread accounts use floating spreads.
How Spread Is Measured
Forex spreads are measured in pips.
For most currency pairs:
- 1 pip = 0.0001
Example
EUR/USD:
- Bid: 1.1000
- Ask: 1.1003
Spread:
Spread:
3 pips
Lower spreads reduce trading costs.
Spread Calculation Example
Let’s look at a practical example.
Trade Details
- Buy EUR/USD
- Ask Price: 1.1055
- Bid Price: 1.1053
Spread:
2 pips
If you’re trading:
- 1 Standard Lot
Approximate pip value:
- $10 per pip
Trading cost:
Before earning any profit, the market must move at least 2 pips in your favor.
Factors That Affect Forex Spreads
Several factors influence forex spreads.
1. Market Liquidity
Highly traded currency pairs generally have tighter spreads.
Examples:
- EUR/USD
- GBP/USD
- USD/JPY
These pairs often have the lowest spreads.
2. Market Volatility
During major economic events:
- Interest rate decisions
- Inflation reports
- Employment data
Spreads often widen because of increased uncertainty.
3. Trading Session
Spreads are usually lowest during:
- London Session
- New York Session
- London–New York overlap
Liquidity is highest during these periods.
4. Currency Pair
Major pairs generally have lower spreads than:
- Minor pairs
- Exotic pairs
Exotic currencies often experience lower liquidity.
5. Broker Pricing Model
Different brokers offer:
- Standard accounts
- Raw spread accounts
- ECN accounts
Each has a different spread structure.
Why Low Spreads Matter
Lower spreads reduce trading costs and improve profitability.
Benefits include:
- Better entry prices
- Lower transaction costs
- Higher net profits
- Improved scalping performance
- Better long-term returns
For active traders making many trades each day, even small differences in spread can significantly affect profitability.
Spread vs Commission
Some beginners confuse spreads with commissions.
| Spread | Commission |
|---|---|
| Built into price | Charged separately |
| Paid when entering a trade | Charged per lot traded |
| Common on Standard accounts | Common on ECN accounts |
Some brokers offer:
- Zero spreads
- Fixed commission per trade
Others include all costs within the spread.
Always compare the total trading cost, not just the advertised spread.
How to Reduce Trading Costs
Professional traders use several methods to reduce costs.
Trade Major Currency Pairs
Major pairs generally have the lowest spreads.
Examples:
- EUR/USD
- GBP/USD
- USD/JPY
Trade During High Liquidity
Avoid trading during:
- Market opens
- Holidays
- Low-volume sessions
High liquidity usually means tighter spreads.
Choose a Low-Spread Broker
Compare:
- Average spreads
- Commission fees
- Execution quality
- Regulation
Don’t choose a broker based only on the lowest advertised spread.
Avoid High-Impact News
Major news releases can temporarily increase spreads.
Waiting for markets to stabilize may reduce trading costs.
Select the Right Account Type
Standard accounts may suit beginners.
Raw Spread or ECN accounts are often better for:
- Scalpers
- Day traders
- High-volume traders
Best Low-Spread Forex Brokers in 2026
Choosing the right broker can significantly reduce trading costs.
Your capital is at risk.
Key Features
- Ultra-low raw spreads
- Fast execution
- Deep liquidity
- MT4, MT5, and cTrader support
Best for:Â Scalpers and professional traders
Read review: For a detailed analysis, check out our IC Markets review for 2026
Your capital is at risk.
Key Features
- Competitive spreads
- Flexible account types
- Fast withdrawals
- High execution speed
Best for:Â Beginners and active forex traders
Read review: For a detailed analysis, check out our Exness review for 2026
Key Features:
- Small minimum deposits
- Educational resources
- Beginner-friendly trading accounts
Best for: New forex traders
Read review: For a detailed analysis, check out our XM review for 2026
Your capital is at risk.
Key Features
- Raw pricing
- ECN trading
- Low commissions
- Excellent execution
Best for:Â Experienced traders
Read review: For a detailed analysis, check out our FP Markets review for 2026
Your capital is at risk.
**Key Features**
- Very low spreads
- Low commissions
- Reliable execution
- Fast order processing
Best for:Â Cost-conscious traders
Read review: For a detailed analysis, check out our Tickmill review for 2026
Common Spread Mistakes
Ignoring Trading Costs
Many beginners only focus on profits without considering spread expenses.
Choosing a Broker Only for Low Spreads
Execution quality and regulation are just as important as pricing.
Trading During News Releases
High volatility often causes spreads to widen sharply.
Confusing Spread with Commission
Always calculate the total cost of trading.
Trading Exotic Pairs Without Understanding Costs
Exotic currencies often have significantly higher spreads than major pairs.
Frequently Asked Questions
What is a spread in forex trading?
A spread is the difference between the bid price and the ask price of a currency pair.
Is spread a trading fee?
Yes. The spread is one of the primary costs of opening a forex trade.
Why do spreads change?
Variable spreads change based on liquidity, volatility, and market conditions.
Which currency pairs have the lowest spreads?
Major pairs like EUR/USD, USD/JPY, and GBP/USD typically have the tightest spreads.
Is a lower spread always better?
Generally yes, but you should also consider commissions, execution quality, and broker regulation.
Which broker offers the lowest spreads?
IC Markets, Exness, FP Markets, Tickmill, XM, and Pepperstone are well known for competitive spreads.
Are fixed spreads better than variable spreads?
Fixed spreads provide predictable costs, while variable spreads are often lower during normal market conditions.
Final Thoughts
The spread is one of the most important trading costs every forex trader should understand.
A lower spread can improve profitability, especially for traders who place frequent trades or use short-term strategies like scalping and day trading.
However, the lowest spread alone should not determine your broker choice. A reliable broker should also offer:
- Strong regulation
- Fast order execution
- Transparent pricing
- Reliable trading platforms
- Responsive customer support
For beginners, understanding how spreads affect every trade is a crucial step toward becoming a more disciplined and successful trader. By combining low trading costs with sound risk management and a trusted broker, you can build a stronger foundation for long-term success in the forex market.
Further reading
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