A spread is the difference between the price a forex broker will pay to buy a currency pair from you and the price they will charge to sell it to you.

When you trade currencies, you never see a single price. Instead, you see two: the bid price (what the broker pays you) and the ask price (what you pay the broker). The spread is the gap between them, measured in pips — the smallest unit of price movement in forex, usually 0.0001 for most currency pairs.

The spread is how your broker makes money. It is not a separate fee you see on a statement; it is built into the prices you trade at. The moment you open a position, you are already behind by the size of the spread. If you trade EUR/USD and the spread is 1.5 pips, you need the price to move 1.5 pips in your favour just to break even.

Key Takeaways

  • The spread is the difference between bid and ask prices, measured in pips, and represents the cost of entering a trade.
  • Spreads vary by currency pair, broker, market conditions, and account type — major pairs like EUR/USD typically have tighter spreads than exotic pairs.
  • Spreads widen during low-liquidity periods such as early Asian trading hours or when major economic news is released.
  • Fixed spreads stay the same regardless of market conditions, while variable spreads change based on supply and demand.
  • Comparing spreads across brokers and account types is one of the largest cost differences you can control as a trader.

How spreads differ by currency pair

Major currency pairs — EUR/USD, GBP/USD, USD/JPY, USD/CHF — have the tightest spreads because they trade in the highest volume and have the most liquidity. A major pair might have a spread of 0.5 to 2 pips on a standard account. Minor pairs like EUR/GBP or AUD/USD typically have spreads of 2 to 4 pips. Exotic pairs like USD/TRY or USD/ZAR can have spreads of 10 pips or wider because fewer traders buy and sell them.

The reason is straightforward: when many traders want to buy and sell a pair at the same time, the broker can match buyers and sellers more easily and take a smaller cut. When few traders are interested in a pair, the broker takes on more risk holding the position and charges a wider spread to compensate.

Fixed spreads versus variable spreads

A fixed spread stays the same whether the market is calm or chaotic. If your broker quotes EUR/USD at a 2-pip spread, it remains 2 pips during the New York open, during a central bank announcement, and during a quiet Asian session. Fixed spreads are predictable — you know exactly what you will pay to enter a trade.

A variable spread changes based on market conditions. During high-volume trading hours, the spread might be 0.8 pips. During low-volume periods or when volatility spikes, it can widen to 5 pips or more. Variable spreads are often tighter on average, but they are unpredictable — you might enter a trade expecting a 1-pip cost and find yourself paying 3 pips if the market moves suddenly.

Neither is inherently better. Fixed spreads suit traders who want certainty and plan trades during predictable hours. Variable spreads suit traders who trade during high-liquidity windows and can tolerate wider spreads during news events.

When spreads widen and why

Spreads expand during periods when fewer traders are active or when uncertainty rises. Early Asian trading hours (roughly 22:00 to 06:00 UTC) see lower volume and wider spreads on most pairs. The 30 minutes before and after major economic announcements — such as US employment data, interest rate decisions, or GDP releases — often see spreads double or triple as traders rush to adjust positions and brokers reduce their risk.

Weekend gaps can also create wide spreads when markets reopen on Sunday evening. If a major news event occurs over the weekend, the first trades on Sunday night may execute at spreads far wider than Friday's close. Some brokers do not even quote prices during the weekend, forcing traders to wait until the market reopens.

How spreads affect your trading costs

The spread is a direct cost that reduces your profit or increases your loss on every trade. On a standard lot (100,000 units of the base currency), a 1-pip spread on EUR/USD costs approximately $10. A 2-pip spread costs $20. If you trade 10 times a day and average a 2-pip spread, you pay $200 in spread costs before you make or lose money on the direction of the trade.

This is why spread size matters more than many traders realize. Switching from a broker with 3-pip spreads to one with 1-pip spreads saves you $20 per standard lot traded. Over 100 trades, that is $2,000 in costs avoided — money that stays in your account instead of going to the broker.

Spreads on different account types

Most brokers offer multiple account types with different spread structures. A standard account typically has spreads of 1.5 to 3 pips on major pairs. A professional or VIP account might have spreads of 0.5 to 1.5 pips but require a larger minimum deposit or monthly trading volume. Some brokers offer zero-spread accounts but charge a fixed commission per trade instead — for example, $5 per standard lot, which may be cheaper or more expensive depending on your spread size and trade frequency.

A micro account (trading in 1,000-unit lots instead of 100,000) often has the same pip spreads as a standard account, but the dollar cost is one-hundredth as large. A 2-pip spread on a micro lot costs about $0.20 instead of $20, making micro accounts useful for learning or testing strategies with lower cost per trade.

Comparing spreads when choosing a broker

When evaluating brokers, request the spread on the pairs you plan to trade most, not just the headline spread on EUR/USD. Ask whether spreads are fixed or variable, and if variable, what the average spread is during your planned trading hours. Some brokers advertise "spreads from 0.1 pips" but that applies only to one pair during one hour of the day; the spreads on the pairs you actually trade may be much wider.

Check the spreads during different market conditions. Many brokers publish historical spread data or allow you to open a demo account and observe spreads in real time. Trade a few micro-lot positions on the demo account during the hours you plan to trade live, and record the actual spreads you see. This is more reliable than any marketing claim.

Frequently Asked Questions

Is the spread the same as a commission?

No. A spread is the difference between bid and ask prices and is how most brokers make money. A commission is a separate fee charged per trade, usually on top of the spread. Some brokers charge no spread but take a commission instead; others charge both a small spread and a small commission.

Can I trade with a spread of zero?

No. A zero-spread account still has a cost — it is just charged as a commission per trade rather than built into the price. The total cost (spread plus commission) is what matters, not whether it is labeled one way or the other.

Why do spreads widen during news releases?

During major economic announcements, many traders place orders at the same time, and the direction of the price move is uncertain. Brokers widen spreads to protect themselves from the risk of being caught on the wrong side of a sudden price jump. Liquidity dries up temporarily, and the broker's cost to hedge their position rises.

Does a tighter spread always mean a better broker?

Not always. A broker with 0.5-pip spreads but poor execution speed or frequent requotes (price changes before your order fills) may cost you more in the long run than a broker with 1.5-pip spreads and reliable execution. Compare spreads alongside execution quality and platform stability.

How much does the spread cost me per trade?

On a standard lot, multiply the spread in pips by $10 for most currency pairs. A 2-pip spread costs $20 per standard lot. On a micro lot (1,000 units), multiply by $0.10. On a mini lot (10,000 units), multiply by $1. The exact amount depends on the currency pair and the exchange rate.