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Spread

In forex trading, the term "spread" refers to the difference between the bid price and ask price of a currency pair. The bid price is the price at which a trader can sell a currency pair, while the ask price is the price at which a trader can buy the same currency pair. The spread is the cost that a trader incurs when entering a trade and is essentially the commission that the broker charges for facilitating the trade.


The spread is expressed in pips, which is the smallest unit of measurement in forex trading. For example, if the bid price of a currency pair is 1.2000 and the ask price is 1.2005, the spread would be 5 pips. The size of the spread can vary depending on various factors such as market volatility, liquidity, and the broker's pricing model.


As the spread represents a cost for traders, it is important to consider it when opening a trade, especially when trading frequently or using a scalping strategy. In general, lower spreads are preferable as they can lead to lower transaction costs and potentially higher profits.

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