Look at any forex quote and you'll see two prices, not one. Understanding what those two numbers mean — and the gap between them — is one of the first things that separates a confident beginner from a confused one. That gap is where your trading cost hides.
The two prices
Every currency pair is quoted with a bid and an ask:
- Bid — the price at which the market will buy the pair from you. In other words, it's the price you sell at.
- Ask (sometimes called the offer) — the price at which the market will sell the pair to you. It's the price you buy at.
The ask is always slightly higher than the bid. If EUR/USD is quoted as 1.0850 / 1.0851, then 1.0850 is the bid and 1.0851 is the ask. You buy at 1.0851 and sell at 1.0850.
What the spread is
The spread is simply the difference between the ask and the bid:
Spread = Ask − Bid
In the example above, the spread is 1.0851 − 1.0850 = 0.0001, or 1 pip. That one pip is not a fee charged separately — it's built into the prices. The moment you open a trade, you're effectively down by the spread, because you bought at the ask and would have to sell back at the lower bid.
Note
The spread is why a brand-new trade often shows a small loss immediately. You haven't done anything wrong — you've simply paid the spread to enter. Price now has to move in your favour by at least the spread before you break even.
Why the spread matters
The spread is a cost you pay on every single trade. Over hundreds of trades, it adds up, so tighter spreads mean cheaper trading. A few things affect how wide it is:
- Liquidity. Heavily traded pairs like EUR/USD, USD/JPY and GBP/USD usually have the tightest spreads because so many buyers and sellers are active.
- Volatility and timing. Spreads can widen during major news, at market open/close, and in thin overnight hours when fewer participants are trading.
- Pair type. Exotic pairs (a major currency paired with a smaller-economy one) tend to have much wider spreads than majors.
Spread and your broker
Brokers make money in part from the spread, so the spread you see is one of the clearest ways to compare trading costs. Some accounts offer very tight "raw" spreads plus a fixed commission; others fold the cost into a slightly wider spread with no separate commission. Neither is automatically better — what matters is the total cost of getting in and out.
Warning
Don't chase the tightest advertised spread alone. Check the total cost (spread plus any commission), whether spreads stay tight during busy hours, and whether the broker is properly regulated. A tiny spread means little if the broker isn't trustworthy.
A quick worked example
Say you buy 1 mini lot (10,000 units) of EUR/USD at the ask of 1.0851, with a 1-pip spread. On a mini lot, each pip is worth about $1. The instant you're filled, if you tried to close, you'd sell at the 1.0850 bid — a $1 cost. Price needs to climb just past 1.0851 for you to be in profit. On a standard lot (where each pip is ~$10), that same 1-pip spread costs about $10 to enter.
How to practise
- Open a chart of a major pair and watch the bid and ask update in real time.
- Note how the spread widens around news releases and tightens in active sessions.
- Compare the spread on a major (EUR/USD) with an exotic pair — the difference is often dramatic.
- Try it on a demo account so you can feel how the spread affects entries without risking real money.
Pepperstone
Best for Copy Trading
Trading Forex and CFDs involves a significant risk of loss.
The bottom line
Every forex quote has a bid (you sell) and an ask (you buy), and the spread between them is the cost of trading. Tighter spreads — usually on liquid major pairs in active hours — mean lower costs. Always judge a broker by the total cost of a trade, not a single advertised number, and remember that the spread is why a fresh position starts slightly in the red.
Educational content only, not financial advice. Trading forex carries a high level of risk. Read our full affiliate disclosure.