Spread meaning in plain words
Every forex or CFD quote has a pair of prices:
- Bid: the price at which you can sell.
- Ask (or offer): the price at which you can buy.
The ask is higher than the bid. The spread is the gap between them. When people ask "what is spread in forex", this gap is the answer. It is a main way a broker or liquidity provider is paid for quoting prices. For the basics of the quote itself, see Bid and ask.
Use the pip calculator to see what a pip is worth for your pair and lot size before you look at spreads in money:
Fill in the empty fields to see the result.
Why spread is a cost on every trade
When you open a trade, you never get a mid price:
- A buy (long) position opens at the ask and is valued, and later closed, at the bid.
- A sell (short) position opens at the bid and is closed at the ask.
So the moment a trade opens, it shows a loss equal to the spread, even if the market has not moved. The price has to move in your favour by at least the spread before the trade breaks even. This happens on every trade, whether it ends in profit or loss.
This matters more for people who trade often or hold trades for a short time. A scalper who opens many small trades pays the spread each time, and those costs add up quickly. See Long and short for how each direction is opened and closed.
A practical detail: MetaTrader charts are usually drawn from bid prices. A buy stop loss or take profit is triggered by the bid, while a sell stop loss or take profit is triggered by the ask. When the spread widens, a sell position's stop can be hit even though the bid line on the chart never reached it.
Precise definitions for experienced traders
| Term | Meaning |
|---|---|
| Quoted spread | Ask minus bid as shown at a given moment |
| Spread in pips | Quoted spread divided by the pip size of the instrument |
| Spread in points | The same gap in the smallest price step; MetaTrader often shows spread this way |
| Mid price | The average of bid and ask; a reference, not a tradable price |
| Relative spread | Spread divided by mid price; useful to compare instruments with very different prices |
| Effective spread | The real cost after execution, including any slippage against the quote |
| Raw spread | The spread close to the liquidity provider's price, usually paired with a commission |
| Marked-up spread | A wider spread that includes the broker's charge instead of a separate commission |
Pips and points are easy to confuse. Read Pips, points, pipettes before comparing spreads from different sources, because one platform may show points while an article shows pips.
What makes a spread wider or narrower
Spreads are usually floating: they change during the day. The main drivers:
- Liquidity. Major pairs with many buyers and sellers tend to have narrow spreads. Exotic pairs, including those with less traded currencies, tend to be wider. See Liquidity.
- Volatility. When prices move fast, liquidity providers quote wider to protect themselves. See Volatility.
- Trading session. Spreads often narrow when major sessions overlap and widen in quiet hours. See Trading sessions and Session overlaps.
- News releases. Around central bank decisions and major data, spreads can widen sharply for a short time.
- Daily rollover. Around the end of the trading day, when many liquidity providers reset, spreads often widen. See Rollover.
- Market open after the weekend or holidays. The first quotes can be wide and may also gap. See Price gaps.
- Instrument type. Metals, indices, energies and crypto CFDs each have their own typical ranges. Gold, for example, is covered in XAUUSD spread.
- Account and pricing model. Some accounts show a wider spread with no commission, others a narrower spread plus a commission. See Fixed vs floating spread and Broker execution models.
Converting spread to money
The formula is simple:
Spread cost = spread in pips × pip value per lot × number of lots
The pip value depends on the pair, the lot size and your account currency. If the quote currency is not your account currency, the pip value has to be converted at the current rate. That is why it is safer to use the calculator than to work it out by hand.
How to do it on this page:
- Read the current spread in your platform (convert points to pips if needed).
- In the pip calculator above, enter the instrument, your lot size and your account currency. Note the value of a pip.
- Multiply that value by the spread in pips. The result is what you pay to open and close that position at the current spread.
For a full picture, use the trade cost calculator. Enter the instrument, lot size, spread, commission per lot (if your account charges one) and the number of nights you plan to hold. It shows spread, commission and swap separately, in money and in pips:
Fill in the empty fields to see the result.
Cost = spread × pip value + commission × lots × 2 − swap × lots × nights (a negative swap is a charge). Spreads change during the day and widen around news.
Related pages: What is a lot, Commission per lot, What is swap, Total trading costs.
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What "low spread" does and does not tell you
A low spread is useful, but it is only one part of the cost:
- An account with a very narrow spread may charge a commission per lot. Compare spread + commission, not spread alone.
- The quoted spread is not always the effective spread. Slippage and requotes can make the real cost higher.
- Swap is charged on positions held overnight and can be larger than the spread for longer trades.
- A spread advertised as typical or minimum may not be the spread you see at news time or at rollover.
If you use an Exness account, check the current spreads and commissions for your account type in the personal area or on the official site, because conditions can change.
Where to see the spread in MetaTrader
In MT4 and MT5 you can open the Market Watch window and turn on the spread column. You can also show the ask line on the chart, so you can see the gap next to the bid line. Practising on a demo account is a safe way to watch how the spread changes across sessions and news.
Risk note
Spread is a cost you pay whether a trade wins or loses. Leveraged forex and CFD trading can lose money fast, and trading costs make losses larger. Read Risk management and Why traders lose before trading with real money. For the legal position of offshore trading in Pakistan, see Law and regulators.
Frequent questions
What is spread in forex in one sentence?
It is the difference between the ask (buy) price and the bid (sell) price of a currency pair, and you pay it every time you open and close a trade.
Is the spread charged when I open or when I close?
Effectively it is paid once per round trip: you buy at the ask and sell at the bid, or the reverse. The trade starts at a loss equal to the spread.
Why did my spread suddenly widen?
Usually because of news, low liquidity, daily rollover or the market reopening after a weekend or holiday.
Is a fixed spread better than a floating spread?
Neither is better in general. A fixed spread is predictable but often wider on average; a floating spread can be narrower but can widen sharply. See Fixed vs floating spread.
How do I know what the spread costs me in rupees or dollars?
Use the pip calculator for the pip value in your account currency, then multiply by the spread in pips, or use the trade cost calculator for spread, commission and swap together.
Does a low spread mean a trade is cheap?
Not by itself. Add commission, swap and possible slippage to see the total cost.