Spread
Spread is the difference between the bid and ask price quoted for a financial instrument.
It is the cost the broker charges at trade entry, deducted instantly when a position opens. Every trade starts in deficit by the spread amount — the market must move further than the spread before the position reaches breakeven.
This page covers the mechanic; it is not trading advice.
What spread looks like at the moment of entry
EUR/USD quoted as 1.0820 / 1.0822 has a 2-pip spread (0.0002). Buying euro at 1.0822 means immediately holding a position that, if measured at the sellable price, is worth 1.0820 — a $20 cost on a 1 standard lot before the market has moved.
The same principle applies to every CFD, equity index, and crypto pair. The instrument is bought at the ask and sold at the bid, and the difference is paid on entry. Spread is not a separate fee billed later; it is paid by the structure of the price quote itself.
What spread costs across a trading week
A trader running 20 round-trip trades per week on EUR/USD at an average 1.2-pip spread on a 1 standard lot account pays 20 × 1.2 × $10 = $240 per week in spread alone. On a $10,000 account, that is a 2.4% weekly drag before any consideration of swap, commission, or strategy edge.
Spread is not constant. On variable-spread accounts (the common ECN/STP structure), the floor on EUR/USD typically sits at 0.1–0.3 pips during the London-New York session overlap, roughly 13:00–17:00 UTC. Outside those hours and during major data releases — US Non-Farm Payrolls, CPI, FOMC decisions — spread can reach 5–10 pips on EUR/USD as market-maker liquidity withdraws.
A stop-loss placed at 10 pips during a 5-pip spread environment executes at market price after trigger, not at the stop level. The effective loss may be 15 pips rather than 10. This is mechanics, not malfunction.
Related terms
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Common questions
What is the difference between fixed and variable spread?
Fixed-spread accounts guarantee the quoted spread regardless of conditions but price it higher than variable floors — typically 1.5 to 2 pips on EUR/USD where a variable account floors at 0.1 to 0.3 pips. Fixed spread offers cost predictability through data releases and low-liquidity periods. Variable spread is materially cheaper during peak liquidity. The correct comparison is the average paid across the actual trading pattern, not the minimum advertised.
Why does spread widen during news events?
During major data releases, market makers reduce quoted depth to protect against adverse selection — they do not know which direction prices will move and pull liquidity to limit exposure. The spread widens to compensate for the increased risk of being filled on a moving market. Spread widening of 5 to 10 times the normal level during the seconds around a major release is typical, not exceptional.