What is a spread?

The spread is the difference between the price at which you can buy (ask) and the price at which you can sell (bid). It is quoted in pips or points and is built into the instrument's price.

When you open a trade you start slightly underwater by the size of the spread, because you buy at the higher price and would close at the lower one.

Fixed vs variable spreads

A fixed spread stays the same regardless of market conditions. A variable spread widens during volatile periods and tightens when the market is liquid.

Variable spreads can be cheaper on average but less predictable. Fixed spreads offer predictability at the cost of usually being wider.

  • Fixed: predictable, often wider
  • Variable: tighter on average, can spike in volatility

Why the spread matters more than you think

For frequent traders, the spread is often the single largest cost, larger than any commission. A 1-pip improvement across many trades compounds over a year.

Use the Pip Calculator and Trading Cost Calculator to turn a spread in pips into a cash cost in your account currency.

Frequently asked questions

Is the spread a fee I pay to the broker?
Effectively yes. The broker earns the spread (or a share of it). On spread-only accounts it is the main way the broker is compensated.
Do all instruments have the same spread?
No. Major forex pairs are typically tighter than exotic pairs, stocks, or commodities, which often carry wider spreads or a commission instead.