What is Spread?
Spread is an essential concept in currency trading.
The difference between the Bid (selling) price and the Ask (buying) price quoted by a broker, representing the primary transaction cost of opening a trade.
Mastering Spread gives traders an edge in evaluating market conditions and managing risk effectively.
Why It Matters for Forex Traders
Understanding foundational mechanics like Spread is essential for accurate order execution, pricing, and capital management.
How to Identify and Apply Spread
- 1Review how Spread affects your transaction costs and margin allocation.
- 2Verify how your broker quotes and executes trades involving Spread.
- 3Factor Spread into your pre-trade risk calculations before executing orders.
Practical Forex Example
A beginner trader double-checks Spread before placing an order to ensure position sizing fits account guidelines.
PRO TRADER TIP
Double check lot sizing and pricing decimals when switching between currency pairs to prevent order entry errors.