What is Spread in Forex: A Beginner’s Complete Guide
Introduction
If you want to become a successful Forex trader, you must understand one important concept — Spread.
Spread is the hidden cost of trading that every trader pays.
In this guide, we will explain what spread is, how it works, and why it matters in Forex trading.
What is Spread in Forex
Spread is the difference between the Buy price (Ask) and the Sell price (Bid) of a currency pair.
In simple words:
It is the fee you pay to your broker for opening a trade.
Example of Spread
Let’s say:
- EUR/USD Buy Price (Ask) = 1.1002
- EUR/USD Sell Price (Bid) = 1.1000
Spread = 2 pips
This means you start your trade with a small loss equal to the spread.
Types of Spread in Forex
1. Fixed Spread
- Does not change
- Stable in all market conditions
- Good for beginners
2. Variable Spread
- Changes based on market conditions
- Low during normal market
- High during news (like NFP)
Why Spread is Important
1. Affects Your Profit
Higher spread = Lower profit
2. Important During News Trading
During major news events (like NFP):
- Spread increases
- Trades become risky
3. Broker Comparison
Different brokers offer different spreads.
Lower spread = Better for traders
When is Spread Lowest
Spread is usually lowest during:
London Session
New York Session
Because trading volume is high.
When is Spread Highest
Spread becomes high during:
News events (like NFP)
Low liquidity time
Market open/close
Pro Tip for Beginners
Always check spread before entering a trade
Avoid trading during high spread times
Choose a broker with low spread
If you are new, read first: What is Forex Trading
Learn news impact here: What is NFP News in Forex
Conclusion
Spread is a small concept but has a big impact on your trading results.
Understanding spread will help you reduce costs and improve your profit.
