- The Bid Price and the Ask Price
- What Is Spread in Forex, Exactly?
- Fixed vs. Variable Spreads
- How the Spread Affects Your Profits
- What Makes Spreads Wider or Narrower?
- Spread vs. Commission: Understanding Total Cost
- Spread and Account Type at Wisuno
- Practical Tips for Managing Spread Costs
- FAQs
- Start with Clarity, Not Surprises
Every time you open a forex trade, you pay a cost that never shows up as a line item on your statement. It's built directly into the price. That cost is the spread, and understanding it is one of the most practical things you can do before you deposit a single dollar.
This article breaks down what the spread is, how it works in real trading conditions, why it changes, and how it affects whether a trade starts with a fighting chance or already in the red.
The Bid Price and the Ask Price
Forex prices are always quoted two ways: a bid and an ask.
The bid price is what the market pays you when you sell. The ask price is what you pay when you buy. These two numbers are never identical — the ask is always slightly higher.
If EUR/USD shows 1.08500 / 1.08515, the bid is 1.08500 and the ask is 1.08515. The 1.5-pip gap between them is the spread.
Click Buy and you enter at 1.08515. For the trade to break even, price needs to climb back to at least that level. Close immediately and you'd sell at the bid of 1.08500, taking a 1.5-pip loss. Nothing went wrong — you simply paid the spread.
What Is Spread in Forex, Exactly?
On most account types, the spread is the broker's primary source of revenue. Rather than charging a visible commission on each trade, the broker earns the difference between the price you buy at and the price you could immediately sell at.
Think of an airport currency exchange booth. It buys your dollars at one rate and sells them back at a slightly higher one. The gap is their margin. Forex brokers work the same way — just with much tighter gaps and far greater volume.
Spreads are measured in pips. For most currency pairs, one pip is the fourth decimal place (0.0001). On JPY pairs, it's the second decimal place (0.01).
Fixed vs. Variable Spreads
Not all spreads behave the same way.
Fixed Spreads
A fixed spread stays constant regardless of what the market is doing. If a broker quotes a 2-pip spread on EUR/USD, you pay 2 pips whether conditions are calm or chaotic. That predictability helps when calculating costs in advance — though fixed spreads tend to run slightly wider than variable spreads during normal market hours.
Variable (Floating) Spreads
Variable spreads move with the market. During high-liquidity windows — like the London-New York session overlap — spreads on major pairs can narrow considerably. During quieter periods, such as late Friday afternoon or around major news releases, the same pair can widen sharply.
ECN accounts typically offer variable spreads that track raw interbank pricing more closely. The trade-off is a separate per-lot commission, which needs to be included in any honest cost calculation.
How the Spread Affects Your Profits
The spread is a cost you pay on every trade, every time. Here's why that matters in practice.
It Sets Your Breakeven Point
The moment you open a position, you're already down by the amount of the spread. The market has to move in your favour by at least that much before you're at breakeven. On a 2-pip spread with a 10-pip target, you're asking for 12 pips of movement just to net 10.
It Compounds Over Time
For active traders, spread costs add up quickly. A scalper taking 20 trades a day at a 2-pip spread is paying 40 pips daily in spread costs alone — before any other fees. For short-term strategies, the spread is often the single largest trading expense.
It Can Make or Break a Strategy
Some approaches only work if spread costs stay below a certain level. A strategy averaging 5 pips per trade becomes structurally unworkable on a pair with a 4-pip spread. Matching your strategy to the spread environment of your chosen pair isn't optional — it's foundational.
What Makes Spreads Wider or Narrower?
Several factors push spreads up or down at any given moment.
Liquidity. Major pairs like EUR/USD, GBP/USD, and USD/JPY are the most traded in the world. High volume means more buyers and sellers competing, which compresses the bid-ask gap. Exotic pairs — USD/TZS or USD/PKR, for example — carry far less liquidity and typically much wider spreads.
Time of day. Spreads are tightest during the London session and the London-New York overlap, roughly 13:00 to 17:00 UTC. They widen during the Asian session and are at their widest in the hour before and after the weekly market open on Sunday evening.
News events. Major economic releases, central bank decisions, and geopolitical developments cause rapid price movement and uncertainty. Liquidity providers widen their quotes to protect themselves, and your broker's spread widens with them. Trading through high-impact news without accounting for this is a common source of unexpected losses for newer traders.
Account type. ECN accounts typically offer tighter raw spreads with a per-lot commission added on top. Standard accounts fold the cost into a wider spread with no separate commission. Neither is inherently better — the right choice depends on your trading volume and style.
Spread vs. Commission: Understanding Total Cost
Looking at the spread alone gives you an incomplete picture when comparing brokers.
A Standard account might show a 1.8-pip spread with no commission. An ECN account might show a 0.2-pip spread plus a $7 commission per round-turn lot. On a standard lot (100,000 units), a 1.8-pip spread on EUR/USD costs roughly $18. The ECN account costs $2 in spread plus $7 in commission — $9 total.
For high-volume traders, ECN pricing often works out cheaper. For lower-volume traders or those using smaller lot sizes, the wider spread on a Standard account may actually cost less once minimum commission thresholds are factored in.
Always calculate total cost per trade, not just the headline spread figure.
Spread and Account Type at Wisuno
Wisuno offers multiple account types — including Standard and ECN — each with a different spread and cost structure. The USD Cent account is built for traders starting with very small positions, while ECN accounts suit those who want tighter raw pricing and are comfortable with per-lot commissions. A Demo account lets you watch how spreads behave under live market conditions before any real capital is involved.
Taking the time to understand the spread environment on your chosen account type before you trade is worth it. The Demo account is a straightforward way to do exactly that.
Practical Tips for Managing Spread Costs
- Trade major pairs during peak sessions. EUR/USD, USD/JPY, and GBP/USD during the London-New York overlap typically offer the tightest spreads available.
- Avoid trading immediately before or after major news releases unless your strategy is specifically designed for that environment.
- Match your strategy to your spread environment. Scalping on a wide-spread pair is a structural disadvantage from the first tick.
- Calculate total cost, not just spread. Factor in commissions, swap fees for overnight positions, and any other applicable charges.
- Use a demo account to observe real spread behaviour. Spreads widen at predictable times and around specific events — watching this in a demo environment costs nothing.
FAQs
What is spread in forex trading?
The spread is the difference between the bid price (what the market pays you to sell) and the ask price (what you pay to buy). It's the cost of entering a trade and the primary way brokers earn revenue on most account types.
How is the spread measured?
In pips. For most currency pairs, one pip equals 0.0001. On JPY pairs, one pip equals 0.01. A 1.5-pip spread on EUR/USD means the ask is 0.00015 higher than the bid.
Does a wider spread mean a worse broker?
Not necessarily. A wider spread on a Standard account may still be cheaper overall than a narrow ECN spread plus commission, depending on your trade size and frequency. Total cost per trade is what matters — not the spread figure in isolation.
When are forex spreads at their tightest?
Generally during the London session and the London-New York overlap, when trading volume peaks. Spreads widen during the Asian session, around news events, and at the weekly market open on Sunday evening.
Do spreads affect all forex strategies equally?
No. Scalpers and short-term traders feel the impact most, since they rely on small price movements and trade frequently. Swing and position traders, holding trades for days or weeks, are far less sensitive to spread costs relative to their profit targets.
What is the difference between a fixed and a variable spread?
A fixed spread stays constant regardless of market conditions. A variable (floating) spread changes with liquidity and volatility. Fixed spreads offer cost predictability; variable spreads can be tighter during normal conditions but may widen sharply around news events.
How do I reduce the impact of spread on my trading?
Trade during high-liquidity sessions, choose pairs with naturally tight spreads, match your account type to your trading style, and calculate total cost per trade — including commissions and overnight swap fees — before entering any position.
Start with Clarity, Not Surprises
The spread isn't a hidden fee. It's a visible, predictable cost once you know where to look. Traders who account for it from the start make better decisions about which pairs to trade, when to trade them, and which account type fits their approach.
If you're still working out which account suits your strategy, Wisuno offers a Demo account alongside Standard, ECN, and USD Cent options — so you can observe real market conditions before putting any capital on the line.
