HFM information and reviews
HFM
96%
FXCC information and reviews
FXCC
92%
FxPro information and reviews
FxPro
89%
FBS information and reviews
FBS
88%
Vantage information and reviews
Vantage
85%
XM information and reviews
XM
82%

What is spread in Forex?


Spread is one of the main conditions for trading and investing in Forex. You should know what Forex spread is if you want to trade in the foreign exchange market. Spread is a cost that the traders incur for every transaction. If the spread is high, it will result in increased cost for trading that will eventually reduce the profit. FXCC is a regulated broker that offers tight spreads to its clients.

What is spread in Forex?

Spread is the difference between the purchase price and the sale price of the asset. In the standard currency market, deals are made all the time, but the spreads are not constant in every position. To understand why this happens, it is worth understanding the difference between the prices of buying and selling a currency when evaluating trades, which also determines the liquidity of the market.

In the stock market and Forex, spread is the difference between the buy and sell price. The spread in Forex is the difference between the ask price and the bid price.

What is a bid, ask, and its relation to the spread?

There are two types of prices on the market:

And the spread is the difference between the previously mentioned ‘bid and ask’ that occurs during the transaction. A good example of a transparent market relationship is bazaar bidding when a low price is put forward and a second bidder adheres to a high rate requirement.

What is the Forex spread from the broker's side?

From the point of view of an online broker, Forex spread is one of the primary income sources, with commissions and swaps. After we have learned what a spread is in Forex, let's see how it is calculated.

How the spread is calculated in Forex?

In the stock market, a spread is the difference between the buy and sell price of a security. The size of the spread varies with each broker and by the volatility and volumes associated with a particular instrument. The most traded currency pair is the EUR/USD and usually, the lowest spread is on EUR/USD. The spread can be fixed or floating and is proportional to the volume placed in the market.

Every online broker publishes typical spreads on the Contract Specifications page. At FXCC, the spreads can be seen on ‘average effective spread’ page. This is a unique tool that shows the history of spread. Traders can see the spread spikes and the time of spike in a single glimpse.

Example - how to calculate the spread

At FXCC, you can use a demo account to see real-time spreads on the platform or calculate spreads using a trading calculator.

Factors affecting the size of the spread on Forex

What factors affect trading spreads?

The spread of CFDs and Forex depends on the underlying asset. The more actively an asset is sold, the more liquid its market is, the more players are in this market, the less likely gaps will appear. The spreads are high in less liquid markets such as exotic currency pairs.

Depending on the broker's offer, you may see fixed or variable spreads. It should be noted that fixed spreads are often not guaranteed by brokers during periods of market volatility or macroeconomic announcements.

Spreads vary based on market conditions: during an important macro announcement, spreads widen, and most brokers do not guarantee spreads during announcements and periods of volatility. If you think about trading during a European Central Bank meeting or while the Fed has an important announcement, don't expect spreads to be the same as usual.

Forex account without a spread

Are you wondering if it is possible to trade Forex without a spread? ECN accounts are accounts that are executed without the participation of a dealer. You have only a small spread on this account, for example, 0.1 - 0.2 pips in EUR / USD. 

Some brokers charge a fixed fee for each contract concluded but FXCC only charges spread and no commission.

The best Forex spread, what is it?

The best spread in the Forex market is the interbank spread. The interbank forex spread is the foreign exchange market's real spread and the spread between the BID and ASK exchange rates. To access interbank spreads, you need an STP or ECN account.

How to find out the spread in MT4?

Open the MetaTrader 4 trading platform, go to the "Market Watch" section. You have access to two ways included by default in the MT4 trading platform:

What is Forex spread - the meaning of the spread in trading?

Each trader has his degree of sensitivity to the cost of the spread. It depends on the trading strategy used. The smaller the timeframe and the larger the number of transactions, the more cautious you should be when it comes to spreading.

If you are a swing trader who wants to accumulate a large number of pips over weeks or even months, the spread's size has little effect on you compared to the size of the moves. But if you are a day trader or scalper, the size of the spread can be equal to the difference between your profit and loss.

If you regularly enter and exit the market, transaction costs can add up. If this is your trading strategy, you should place your orders when the spread is optimal.

#source


RELATED

What Are Commodities and How to Trade Them?

Since the beginning of human civilization, commodities have been a vital investment asset. In short, a commodity is a basic good or raw material that people buy and sell...

Exciting Benefits of Trading Forex

Forex trading is the exchange of one currency for another to generate profits. If you’re reading this, you probably know that and are now looking to choose between the existing options like stock...

Common Mistakes Made by Novice Traders and How to Steer Clear of Them

Trading in the financial markets is a realm that beckons many, but it is fraught with challenges that often go underestimated by novice traders. A lack of profound understanding of market intricacies...

How To Trade Forex: A Beginners' Guide

Are you wondering how to trade Forex? This article helps you through the insights of the Forex market. FX is one of the largest financial markets in the world...

A Beginners Guide To Pairs Trading

The ideal strategy is the one that allows a trader to make money in any market, regardless of whether the price is falling or rising. Such trading systems are called arbitrage trading systems...

What Is the OTC Market?

Over-The-Counter markets are popular among investors and traders. This term is mostly associated with the trading of company shares. Yet, it's possible...

Everything You Need to Know About Cryptocurrencies

The concept of money as we know it has evolved in recent years from purely physical money to a combination of the physical; digital representations of physical money...

What Is A Blockchain Bridge?

Today, Bitcoin and other cryptocurrencies dominate the discussion in finance and on Wall Street, but what makes these emerging assets so valuable is the blockchain...

Scalping: When Seconds Count

Today we will be talking about scalping as a trading approach. Scalping is characterized by very short-term trades with minor price changes and a profit of several ticks...

The Ultimate Guide To Stock Investing For Complete Beginners

There`s hardly a single person today who has heard about the passive income that investing can consistently bring in. There are many examples: from the great financiers...

Risk Management on Forex: Basic Rules

Senior traders would say that there is no chance to build a successful career without risk management. Whatever your trade duration is, the trade should...

A Guide to Trading EURUSD

EUR/USD is the currency pair which matches the exchange rate of euro (EUR) against the US dollar (USD). Traders can trade EUR/USD using financial derivatives like contract-for-differences (CFDs)...

Is it Easy to Learn Forex? A Comprehensive Guide to Mastering Forex Trading

Forex trading is a popular and potentially lucrative way to earn both active and passive income. However, it's essential to understand that learning forex is an ongoing process that doesn't depend on whether...

Top Forex Trading Tips For Beginners

Want to know the best trading tips today to use to your advantage in the Forex market? This article will break down good trading tips you should consider using...

What is Algorithmic Trading?

Algorithmic trading (also called automated trading, black-box trading, or algo-trading) uses a computer program that follows an algorithm (a defined set of instructions) to place a trade...

The Moving Average Convergence Divergence (MACD)

The Moving Average Convergence Divergence (MACD) is a versatile and widely used technical indicator that offers insights into trends, momentum, and potential reversal points in the forex market...

Proactive Trader: a Team Player or a Loner?

When you start trading, many questions appear in your head. Today we concentrate only on ones that consider the effectiveness of performing on Forex...

Dogecoin vs. Bitcoin: Which one is the Better Investment?

Dogecoin and Bitcoin are two well-known crypto assets. However, some traders may not know how to compare Dogecoin vs. Bitcoin, so knowing some of the significant similarities and differences...

How to Trade CFDs on Gold and Silver

Gold and silver have been chosen by traders for hundreds of years now. These metals are always in demand, especially from manufacturers of jewellery or other sectors such as the electronics...

Trader: Profession of the 21st Century

Trading is the process of buying and selling various financial instruments. Therefore, a trader is an individual seeking to profit directly from the trading process...

FP Markets information and reviews
FP Markets
81%
RoboForex information and reviews
RoboForex
77%
IronFX information and reviews
IronFX
77%
T4Trade information and reviews
T4Trade
76%
Exness information and reviews
Exness
76%
Just2Trade information and reviews
Just2Trade
76%

© 2006-2025 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.