Spread on forex 3

How to calculate Forex spread into trades | Bid Ask Prices.

Have you ever had an open trade that has been stopped out before price actually reached your stop loss level. Or maybe seen price reach your trade profit target level, but the trade never closed in profit? How about this one, you set up a pending buy order at a key price level, the market does reach your price level on the chart but the trade never gets triggered. You’re thinking to yourself, “What the hell is going on here?” You start blaming your broker or start cursing the market fueled with frustration and rage. You’ve become aware that this is a recurring problem and you really start coming up with conspiracy theories about your broker and the market, thinking they are out to get you and they are making it as hard as possible to profit in Forex trading. Well here is a big slap in the face, it’s not the market, it’s not the broker, it’s YOU! What you are failing to do is factor in the market spread into your trade levels. A professional trader must always account for the spread otherwise you will experience these inconsistencies with trades not triggering or stops being triggered before they were hit. In this article we are going discuss the difference between the BID and ASK price, cover what the market spread is and explain how you should factor in the spread to your trade levels to stop these mishaps.

The BID and ASK Prices.

It is crucial as a professional trader that you understand the difference between the BID and ASK prices, failing to do so will mean you will no doubt make potentially costly mistakes when setting up your trades. When you look at your trade order screen you will see two price quotes, the BID and ASK prices. Every time you place a trade these two price quotes come into play. It’s important you are fully aware how they will affect your trade order when you execute it.

The BID Price The BID price is something that you will be very familiar with. The BID price is the price you see on the charts so if EURUSD was printing 1.3000 on your chart then the BID price is 1.3000. The BID price is the price is what you deal with every time you press that sell button; because it’s the price your broker is willing to buy the currency off you. You’re ‘selling’ the currency to your broker at the BID price. The ASK Price The ASK price is where things get a little more complicated, the ASK price is responsible for causing those unexpected ‘glitches’ in your trade orders. You don’t normally see the ASK price when you have your charts open, it’s only when you open your trade order window the ASK price pops up. The ASK price is what your broker is willing to sell you the currency for, and it’s a completely different price than what you see on the charts. The ASK price is what you deal with every time the BUY button is pressed and it’s more expensive than the BID price you are looking at on the chart. So ASK price is the price your broker is ‘asking’ for to buy the currency of them. The BID price may 1.3000 on the charts but your brokers ASK price may be something like 1.3003. This is where calculated Forex spread comes into play.

Calculate Forex Spread to Avoid Confusion.

As a retail trader you need to have an account with a broker to be able to interact with the market, there is really no way around this, it’s just a fact of trading. You might be thinking, “Oh how nice of these brokers to facilitate the means for us retail traders at home to be able to place trades on the global market. Thanks Mr Broker!” Well if that’s what you thought then I am about to shatter the reputation you have with brokers. Forex brokers are businesses; they provide a service with the objective of turning over a profit. So where are these profits coming from? Brokers don’t ASK you for a monthly fee to have an account open, how do they make money? They make money through the market spread they’ve created. The spread is the difference between the BID and the ASK prices. It’s all in the ASK price for them, every time you make a transaction that deals with the ASK price the broker makes money. Brokers LOVE high frequency traders which place lots of trades every day, because each of these transactions generates the broker profit, regardless whether the trader loses or wins the trade. You can calculate the spread by subtracting the BID price from the ASK price. Spread = ASK – BID . Forex has become exponentially popular in the last few years, with more and more Forex accounts being opened each day. This means more brokers, and that means more competitions between them. Brokers want you to have your trading account with them; they want to facilitate your trades and they will go to extreme lengths to get you as a customer. Because the broker market has become extremely competitive, they are fighting each other for our business as a trader. This is good for us traders because this keeps their spread prices down. No one wants to have an account with a broker who charges expensive ASK prices, so thanks to the high demand trading is relatively cheap. But we still need to know how to deal with the differences in BID and ASK prices when we place our trade order, even though most of the time the difference is only a few pips.

How to factor in the spread when placing a trade order.

When placing orders, you need to remember two key rules. It’s important that you memorize these two rules because you will need to apply them every time you enter and exit a trade. Read over them 3 times just to be sure or write them down on a sticky and place it on your trading monitor until you memorize them.

When you go long, you enter the market at the ASK price and exit the market at BID price. When you go short, you enter the market at the BID price and exit at the ASK price.

Placing Long Trades.

Say you wanted to set a pending order to go long when EUR/USD hits 1.3000 on the chart, you don’t simply place the pending order entry price at 1.3000. Remember the rule for long trades, you ‘enter the market at the ASK price’ because the ASK price what your broker is willing to sell you the currency for. Whenever you are the buyer – the ASK price is quoted. This means when the market reaches 1.3000 you have to anticipate where the ASK price will be at that point in time. If your broker’s spread is roughly 2 pips for EUR/USD, when the market reaches 1.3000 your broker is going to be ‘asking’ 1.3002. So when the price on the chart reaches 1.3000 (this is the BID price), your broker will be willing to sell the currency for (1.3002 when the spread is 2 pips). If you place your pending order with an entry price of 1.3000, your trade will not be triggered because your broker is not willing to sell you the currency for that price at that point in time. To be triggered in you would need to wait for the BID price to reach 1.2998, which at that point in time the broker’s ASK price will be 1.3000 and your trade will be filled. So in order to be triggered in when the BID price reaches 1.3000 you need to add the market spread to this price and set your entry order at 1.3002. Watch the small animation below for a visual example. Setting Up A Long Entry.

When you calculate Forex spread and add it to your buy order with the intention of entering the market when the charts hit 1.3000, you’re entry price is placed at 1.3002. When the market reaches 1.3000 you will be triggered into the trade. Setting up stop loss and exit prices for long orders. We need to refer back to the early statement.

When you go long, you enter the market at the ASK price and exit the market at BID price.

This makes setting stop losses and target levels really easy. You are exiting at the BID price, this is the price your broker is willing to buy the currency back of you and they are only willing to pay the prices they can normally get from the Interbank Market. When you exit the trade you sell the currency back to them. This uses the BID price. The BID price is what you see on the charts and there is no commission involved, so you simple set the stop and target levels directly off the BID prices you see on the charts. Easy!

Setting Up Short Trades.

Thing are a little bit in reverse when you are dealing with selling transactions, so let’s refer back to the rule for selling…

Short trades = ‘Enter the market via BID price, exit via the ASK price’

When dealing with short trade orders, things have to be worked the other way around. Short trades enter the market via the BID price, so whatever price is on the chart you want to short from you simply use that price in your short entry order. However, with the stop loss and target prices on short trade we need to calculate Forex spread and factor it in, because we are going to be exiting the trade via the ASK price. The ASK price is more expensive than the market BID price because of the brokers commission. Just like when dealing with the ASK price in your buy entry orders, you simply need to add the market spread onto your stop loss and target prices for your short orders. Take a look at this short animation below for a visual demonstration. Setting Up A Short Stop Loss.

You can see from the animation above how the broker’s ASK price can stop you out of your trade before the chart price ( BID ) hits your stop loss. Technically your stop was hit, because you exit at the ASK price, it’s just that the ASK price is not normally shown on your typical candlestick chart. To avoid your trades from being stopped out earlier than expected, do the right thing, calculate Forex spread and add it onto your stop loss value. Doing so will allow your trade to freely move all the way to its stop loss level before the actual stop is triggered. In the animation above, we wanted to be stopped out if the BID price entered 1.3100, so we added the market spread and placed our stop loss order at 1.3102. We knew when the BID price was 1.3100 the ASK price would be 1.3102 and we were taken out of the trade at the correct level. Don’t forget you must calculate Forex spread and also apply it to your short order target levels. You are exiting at the ASK price. So find your desired target price on the charts, add the market spread to that price and use that in your target price level for every short trade order. Now you know how to correctly place trade orders and enter a Forex trade the right way. You won’t be exploding with rage because your pending get triggered, and your trades exit at the intended price levels.

Learn more Forex Trading Tips n Tricks.

Each broker is also different with spread charges, it’s important you choose the right broker for your trading. Our Price Action Protocol trading system uses logical stop loss levels. This means stop loss prices are set at a point where we know if the market crosses, the trade didn’t work out and we want to be automatically exited out of the trade. We don’t want to be taken out of trades too early due to lack of consideration for the market spread, so it’s very important that we always apply the rules that we’ve discussed in this article.

Spread on forex 2

What is the Bid-Ask Spread in Foreign Exchange?

The bid-ask spread in an exchange of currencies is the difference between what a foreign currency dealer will buy and sell a particular currency for.

The bid price is what they are willing to pay for a currency and the asking price is what they are willing to sell a currency for.

If, for example, the bid-ask spread for EUR/GBP (euro/pound sterling) is advertised by a foreign currency dealer as 0.8452/0.8456 this means that they will buy 1 EUR for 0.8452 GBP and sell 1 euro for 0.8456 GBP.

If you were to sell this dealer 1,000,000 EUR, they would give you 845,200 GBP. However, it would cost 845,600 GBP to buy 1,000,000 EUR.

Why is There a Bid-Ask Spread?

Foreign currency dealers quote exchange rates with a bid-ask spread in order to cover their costs and make a profit.

In other financial services, it is common for dealers to charge a commission and this does sometimes happen in currency exchange. However, rather than charging a commission for exchanging currency, it is the convention for dealers to make their charges within the bid-ask spread.

The reason behind this is that it makes the process of calculating how much one currency will be worth in another simpler. Going back to our example, it is possible to see straight away that if you have 1,000,000 EUR, the dealer will pay 845,200 GBP for it. If there were a commission to calculate on top of the exchange rate, this would require an extra step and would add unnecessary complications to the calculation.

To get around this problem, dealers just set all of their exchange rates with a bid-ask spread. An upshot of this is that the dealer’s charges become hidden within the bid-ask spread. However, it is still simple to compare the exchange rates offered by different dealers and just pick the best one available.

How Do You Calculate the Bid-Ask Spread?

The bid-ask spread is normally expressed as a percentage and is calculated according to the following formula…

Going back to the earlier example, the foreign exchange spread can be calculated as.

A simpler way of expressing the bid-ask spread is just by expressing it directly by subtracting the bid price from the asking price.

In our example, this would be 0.8456 – 0.8452 = 0.0004.

Why Do Bid-Ask Spreads Vary?

Bid-ask spreads vary from currency to currency and from dealer to dealer. It is a good idea to understand the kind of rate that you should get for particular currency exchange and to shop around to find the best dealer.

Dealer Type.

Different dealers offer different rates. The example rates used so far, with a bid-ask spread of only 0.0473%, are minimal rates, with the dealer taking relatively little profit from the exchange of currencies. This might be the kind of rate that is available for a large international transaction.

Other dealers, however, do not offer such good rates. The rates that are available at airport kiosks offering currency exchange are a good example of poor rates of exchange. These dealers have a wider bid-ask spread because they charge a larger amount for currency exchange.

Airport Currency Exchange Kiosks.

For example, an airport currency exchange service may offer rates for EUR/GBP of 0.8250/0.8750. At this rate, it would cost 8750 GBP to buy 10,000 EUR and 10,000 EUR would be worth 8250 GBP.

In this example, the bid-ask spread is 5.714% or equal to 500 GBP. This is a relatively large spread and represents a large fee being charged by the dealer.

It should be pointed out that different dealers offer different rates and they may actually be more favourable than this or alternative rates may be given for large amounts of money, such as 10,000 GBP, compared to smaller amounts of money. Airport kiosks also have significantly higher costs to cover and usually deal with small amounts of currency, which forces them to charge more.

However, it is common knowledge that airport currency exchange kiosks tend to charge a higher amount than other dealers. The convenience that they offer usually makes them a good choice for smaller exchanges of currency, such as for a small amount of holiday spending money.

The Amount of Currency.

As we just mentioned, the amount of currency that is exchanged may affect the rate that is available. The same dealer may offer a more preferential rate to a customer who is looking to exchange a large amount of currency. Individuals who exchange a small amount, such as 250 GBP for the first few days of a holiday, usually pay far more than businesses or individuals who exchange large sums of money.

Currency Type.

Currencies that are traded around the world in large volumes usually come with a lower fee and, as a result, with a lower bid-ask spread. This relates to market liquidity, which is also a fundamental aspect of bid-ask spreads in industries other than a currency exchange.

Where a dealer is able to buy a currency and quickly sell it to another buyer, the market is said to have a high level of liquidity. This is common in currencies that are traded in large volumes, such as pound sterling (GBP), US dollars (USD), and euros (EUR). Essentially, because it is easy for a dealer to find a buyer for a particular currency, they are able to trade with tighter margins, which are shown directly in tighter bid-ask spreads.

Currency Volatility.

Currencies that are subject to a higher level of volatility usually come with a larger bid-ask spread because dealers look to protect themselves against the risk that they take by trading in them.

Whether it be due to political instability, economic instability, or other causes, certain countries have unstable currencies. The pound sterling has even had a notably higher level of instability since the Brexit vote of 2022.

Where this happens, currency dealers take a bigger risk when they obtain foreign currency for future exchanges. The risk that the currency could drastically alter in value is reflected in the bigger bid-ask spread in exchanges for this currency (which itself represents a larger fee is charged).

Fluctuating Exchange Rates.

For people who frequently deal in exchange rates and track the movements of bid-ask spreads for different dealers, it quickly becomes obvious how much exchange rates vary over time.

While savings can be made by switching between different foreign currency dealers, many people find that even bigger savings can be made by chance when the exchange rate changes in a favourable way.

However, losses can be made as a result of fluctuating exchange rates as well and in business, this can be a particularly big problem.

It is estimated that, for small and medium-sized enterprises in the UK which deal in foreign currencies, the average annual loss as a result of fluctuations in the exchange rate is in the tens of thousands of pounds.

What many of these companies can do is carry out FX hedging. This is when businesses that are exposed to risk from fluctuating exchange rates provide themselves with an alternative to committing to making exchanges of currency in the future that will be done at whatever the current market exchange rate is at that time.

FX Hedging.

Bound are FX hedging specialists. Our online platform provides a fast, easy and transparent way for businesses that deal in foreign currencies to manage their currency exchanges over time in order to ensure that they don’t lose out as a result of changes to the exchange rate.

Some people are completely unaware that it is possible to fix an exchange rate for a foreign exchange transaction in advance. It is common practice for businesses to be able to fix their exchange rates for up to a year in advance and to operate with complete certainty about what costs and profits will be when operating internationally. On top of this, it is also possible in many cases for international businesses to both protect themselves against an unfavourable change in the exchange rate and benefit from a favourable one.

Spread on forex 1

What Is Spread? Forex Basics.

A spread is the difference between the ask price and the bid price. In other words, it is the cost of trading. For example, if the Euro to US dollar is trading with an ask price of 1.14010 and a bid price of 1.14000, then the spread will be the ask minus the bid price. In this case, 0.0001. The spread of 0.0001 is equal to one pip. Spreads are calculated in the same way for yen-based currencies like USDJPY. If the yen to the US dollar is trading with an ask price of 120.42 and a bid price of 120.40, then the spread will be 0.02 (120.42 – 120.40). This is equal to 2 pips.

Why is the Bid-Ask spread important in forex?

The spread is the cost of the forex transaction, and you’ll want to determine if that cost suits your trading style. For example, if you make many short-term trades, a wide spread could leave you with little profit.

What is the Bid/Ask spread formula?

To calculate the spread as a percentage, subtract the bid price from the ask price, divide the answer by the ask price, and then multiply the result by 100. For example:

ASK PRICE 1.1502 – BID PRICE 1.1500 x100 = SPREAD 0.0173% ASK PRICE 1.1502.

What is a ‘tight spread’ in forex trading?

A tight spread – also called a narrow spread – is when the difference between the ask price and the bid price is small.

Are tight spreads good for forex traders?

The tighter the spread, the sooner the price of the currency pair might move beyond the spread — so you’re more likely to make a gain. Plus, the cost of the trade is lower.

Why do Bid-Ask spreads narrow or widen?

The spread is mostly dictated by liquidity levels – how many people are involved in trading a currency pair. Higher activity in the market means a narrower spread, lower activity means a wider spread.

What is a floating spread?

A floating (or variable) spread is when the difference between the Ask and Bid prices fluctuates. This is usually due to market factors such as supply, demand and the amount of total trading activity.

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Spread on forex

Forex Spreads: Low Spread Scalping Strategies.

Forex scalping can be very exciting for traders. The promise of "free" cash with a good scalping strategy can make a trader's head spin and their fingers very trigger happy (by which traders start taking many trades). However, no Forex scalping strategy can be effective without understanding the size of the Forex spread and how to exploit the advantage of low spreads. This article will address questions such as 'What is a spread in Forex?', 'What is scalping in Forex?', and 'Why are low spreads important?'. We'll also cover two key strategies for scalping pairs that have their spreads lowered.

Table of Contents.

What is the Trading Spread in Forex? What is Scalping in Forex? Top Low Spread Scalping Strategies Key Considerations for Low Spread Trading Conclusion.

What is the Trading Spread in Forex?

In Forex trading, the 'spread' refers to the difference between the Buy (or Bid) and Sell (or Ask) price of a currency pair. For instance, if the EUR/USD Bid price is 1.16909, and the Ask price is 1.16919, the spread is 1 pip. If the Bid price is 1.16909 and the Ask price is 1.16949, the spread would be 4 pips. When trading Forex, a trader makes a profit based on the movement of the currency pair. However, the trade only becomes profitable once the currency price has crossed the spread.

So, if the currency pair has a 1 pip spread, in a Long trade, the value of the currency would need to increase by at least 2 pips before the trader would profit (1 pip for the spread, and an extra pip for the profit). The wider the spread, the longer it will take for any trade to become profitable. So if we compare EUR/USD with a 0.6 pip spread to a high-spread pair like AUD/NZD (which is typically 6-10 pip, though the typical spread at Admirals is just 3.1 pips),* the EUR/USD currency pair wouldn't need to move as far as the AUD/NZD currency paid in order for a trade to become profitable.

What is Scalping in Forex?

Scalping in the Forex market involves taking advantage of minor price changes in the market, by making many small trades over very short time periods - usually between 1 and 15 minutes. For a 1 minute trade, a trader would look to make a 5 pip profit, while a 5 minute scalp would aim for a 10 pip profit.

Because these trades are so small, the importance of choosing low-spread currency pairs is clear - if a spread is too large, there will be no profit left over once the trade ends. Because the focus is on such small trades, this is a very popular trading style for many traders, as it creates many opportunities within a single day.

Top Low Spread Scalping Strategies.

When it comes to taking advantage of low spreads, Forex scalping strategies provide many opportunities for traders. An FX currency pair may move 25 pips long or short for a minute, then pull back 10 pips the next minute, oscillate at this level for another 5 minutes, and make another strong 25 pip move over the next ten minutes.

This is usually a minor move in the Forex market, occurring over a matter of minutes, and this is what you, the scalper, are after. But first, let's discuss why it is so important to get educated on scalping. Of course, scalping wouldn't be nearly as popular if it didn't provide benefits, mainly:

The possibility to achieve a greater level of profit than you can by merely making positional trades. No waiting around for a strong trend to develop. Many trading opportunities. No pressure to analyse the overall market.

On the other hand, scalping also has some disadvantages, including:

A lower margin for mistakes. Too many 'good' trades leading to overconfidence. It can be exhausting at times. There is a risk of overtrading. A greater level of loss.

Strategy Number One – Extreme Scalping.

Bollinger Bands (20, 3). Exponential Moving Average (3), close MACD Histogram (6,17,8) Relative Strength Index (14) with 50 level.

Timeframe: 1 min.

Pairs traded: EUR/USD , GBP/USD , USD/JPY , USD/CAD.

Wait for the 3 EMA to cross up through from the 18 Bollinger Bands middle line Wait for the Relative Strength Index and MACD Histogram to line up above 0 on the MACD, and above 50 on RSI.

Wait for the 3 EMA to cross down through the 18 Bollinger Bands middle line Wait for the Relative Strength Index and MACD Histogram to line up below 0 on MACD and below 50 on RSI.

Place the stop-loss for long trade a few pips below lower band Place the stop-loss for sell a few pips above upper band.

Place profit target on opposite band Average target is 5-15 pips.

Strategy Number Two – Gold CFD Trading Strategy.

For this strategy it is strongly recommended to download and use the MT4 Supreme Edition, as it incorporates the Admiral Pivot indicator that is used in this strategy.

Exponential Moving Average (5), close Exponential Moving Average (10), close Stochastic Oscillator (8,3,3) Relative Strength Index (14) with 50 level.

Commodity CFD trading: GOLD.

The price should be at or very close to the Admiral Pivot support (S1, S2, S3) or slightly above the Pivot Point (PP) Wait for the 5 EMA to cross above 10 EMA The Stochastic should have recently crossed 20 from below The RSI should be above 50.

The price should be at or very close to the Admiral Pivot resistance (R1,R2,R3) or slightly below the Pivot Point (PP) Wait for the 5 EMA to cross below 10 EMA Stochastic should have recently crossed 80 from above The RSI should be below 50.

Place the stop-loss for long trade below previous support Place the stop-loss for sell trade above previous resistance.

Place the profit target close to the next pivot.

Source: MetaTrader 4 Gold. Charts for financial instruments in this article are for illustrative purposes and does not constitute trading advice or a solicitation to buy or sell any financial instrument provided by Admirals (CFDs, ETFs, Shares). Past performance is not necessarily an indication of future performance.

When taking long trades, it is always best to see that stochastics have just crossed above 20 from below. When taking short trades, it is always best to see that stochastics have just crossed below 80 from above. Using 'Profit Stop' is advised after a trade has gone into profits. Download MT4 Supreme edition Use 'VPS' (Volatility Protection Settings)

Trade Forex & CFDs With Admirals.

Professional trading has never been more accessible than right now! Admirals offers professional traders the ability to trade on the Forex market directly and via CFDs with 80+ currencies, including Forex majors, Forex minors, exotic pairs and more! Open your live trading account today by clicking the banner below!

Master trading basics with industry experts.

Key Considerations for Low Spread Trading.

When using low spreads as a part of their trading strategy, it's important for traders to keep the following factors in mind:

ATR Stop-loss vs stop grab Correlation Margin benefits Spread percentage.


ATR is the indicator that measures the volatility of a financial instrument. It also projects high and low range based on its calculation. The higher the ATR, the higher the volatility. For instance, if the AUD/NZD moved 60 pips a day while the EUR/USD moved 90-120 pips a day, the EUR/USD would have a higher ATR.

When it comes to low-spread trading, while higher volatility can compensate for a wide spread, the ideal scenario is one where the volatility is high while the spread is low. To go back to the previous example, if the AUD/NZD moved 60 pips a day, and you paid a 6-pip spread, the total trading profit would be based on 54 pips. By contrast, if the EUR/USD moved 100 pips and had a one pip spread, the profit would be calculated based on 99 pips.

Stop-loss vs. stop grab.

Source: MetaTrader 4 GBP/USD. Charts for financial instruments in this article are for illustrative purposes and does not constitute trading advice or a solicitation to buy or sell any financial instrument provided by Admirals (CFDs, ETFs, Shares). Past performance is not necessarily an indication of future performance.

You also need to consider what happens when your stop-loss gets hit on those high spread pairs. You are paying a huge spread when your 'market order' stop-loss order hits the market. That might create a pattern that collects all stops above or below it. The more stops that are hit, the stronger the move of the price is going to be. This might even push the price to the next support or resistance level, creating a fake out, caused by a stop grabber.


Source: MetaTrader Supreme Edition - Correlation Matrix.

In financial terms, correlation is the numerical measure of the relationship between two variables. The range of the correlation coefficient is between -1 and +1. A correlation of +1 denotes that the two currency pairs will flow in the same direction. A correlation of -1 indicates that the two currency pairs will move in the opposite directions, 100% of the time. Meanwhile, a correlation of zero denotes that the relationship between the currency pairs is completely arbitrary.

So in the chart above, you can see that EUR/GBP and GBP/USD are negatively correlated (-98). This means that they move in a completely opposite direction. If you compare the current ATR of EUR/GBP(70) to ATR of GBP/USD(128), it is very easy to see which pair to trade. Moreover, the spread on EUR/GBP is 2.5 pips, while GBP/USD has a spread of 1.4 pips. Occasionally you'll see that brokers change the spread and allow you to trade with extremely low costs, so make sure to look out for them!

Margin benefits.

The trader's account should be in a better position to handle setups with larger drawdowns before problems with margins hit the radar. Traders are, therefore, less limited in terms of the number of trades. This can be particularly useful when the market accelerates in its price action, and it suddenly offers the trader more opportunities to trade.

Spread percentage.

The spread fluctuation might also depend on market factor, namely, liquidity. A market that is liquid means that it has many trades on a daily basis, and is composed of many active traders. The Forex market is extremely liquid because hundreds of banks and millions of individuals trade currencies on it every day. The spread is then divided by the average daily range of a currency pair. This gives us a percentage which tells us more precisely how much the spread costs. The lower the number, the better it is.

The spread can be considered an opportunity cost in the sense that it might reduce the amount of profit gained from the daily range calculated by ATR. The higher this opportunity cost, the more likely it is to convert to losing trades and, subsequently, real financial losses. In the table below are some examples using current average spreads* and ATR (the lower, the better).

* MT4 average spreads as of January 26 2022.


Typical Spread Value : 1.0 pips.

Spread as a percentage of ATR: 1.0/87 = 1.14 %


Typical Spread Value: 1.4 pips.

Spread as a percentage of ATR: 0.85 %


Typical Spread Value: 1.1pips.

Spread as a percentage of ATR: 0.72 %


Typical Spread Value: 1.0 pips.

Spread as a percentage of ATR: 0.8 %


Typical Spread Value: 18 pips.

Spread as a percentage of ATR: 1.23 %


Typical Spread Value: 6.5 pips.

Spread as a percentage of ATR: 3.11 %

Source: An example of a MetaTrader 4 account.


If we compare the first five instruments with the GBP/NZD currency pair at the bottom of the table further up, we can see a clear difference in the numbers, and therefore, it is easy to understand the effect of low spreads on opportunity costs, their benefits, and why they should be considered by professional traders.

The example in the screenshot above clearly shows that highly profitable gains are possible when using low spread scalping strategies. If you would like to attempt these strategies yourself, we would recommend that you use a Demo account first, in order to test them in a risk free environment, before transitioning to a live account and testing them in the real-life markets.

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Spread forex 9

Understanding the basics in Forex Market - Spreads.

The spread in forex trading refers to the difference between the bid (sell) price and a currency pair's ask (buy) price.

The spread is a small cost charged by some brokers and is built into the bid and ask prices of currency pairs. Brokers using spread as charges normally do not have separate commission fees, giving them the name - No Commission Brokers.

How to measure spread in forex trading?

The spread is measured in pips, which is the smallest unit of price movement for a currency pair.

In general, a pip means the fourth decimal place of the price of a currency pair (except for JPY, where a pip refers to the second decimal place).

Here’s an example of a 2 pip spread for the EUR/USD currency pair.

How to calculate spread costs?

To calculate how much the spread costs, you just need to multiply the spread value (in pip) and the number of lots you’re trading by the cost per pip.

Spread value x Number of lots x cost per pip = Spread costs.

Continuing from the above example, if you are buying a standard lot of EUR/USD currency pair, with a 2 pip spread, with the cost per pip of $10, your spread cost can be calculated as below:

Spread value x Number of lots x cost per pip = Spread costs.

2 Pips (spread value) x 1 (standard lot) x $10 (cost per pip) = $20 (spread costs)

If you’re buying 5 standard lots of EUR/USD, with the same spread value, your spread costs will be calculated as below:

2 Pips x 5 x $10 = $100.

If you’re buying 5 standard lots of GBP/USD, with a spread value of 2.2 pips, your spread costs will be calculated as below:

2.2 Pips x 5 x $10 = $110.

Note that the spread costs will increase when your lot size or spread value increases. Similarly, when your lot size or spread value decreases, the costs of the spread will decrease as well.

What affects the spread value?

Spread can be affected by various factors in the market. In general, the major currency pairs will have a tighter spread value compared to emerging market currency pairs.

Other than the types of currency pairs, liquidity and volatility in a market will affect the spread value as well. A market with lower liquidity and higher volatility will lead to a wider spread value. Vice versa, a market with higher liquidity and lower volatility will lead to a tighter spread.

When there is an overlap of major forex market sessions, the spread value will be tighter as well.

Types of spreads.

Spread in forex trading refers to the difference between a currency pair's bid and ask price. It is a small cost charged by some brokers and is built into the bid and ask prices of currency pairs.

Forex brokers offered 2 types of spreads: Fixed spreads and Floating spreads .

In this article, we will outline the differences between these two types of spreads.

Fixed spread.

A fixed spread is the amount of spread fixed by a broker and will not change regardless of the market conditions. Regardless of whether the market is volatile or not, the amount of spread for the currency pair will remain the same according to the amount that the broker has fixed.

Pros and Cons of Fixed Spread.

The advantage of a fixed spread is that it makes transaction cost more predictable. Traders can easily calculate the cost for each of their transactions . Besides, with a fixed spread, volatility and liquidity in the market will not affect the spread value. As mentioned earlier, high volatility with low liquidity will normally cause spreads to widen. In such a situation, traders trading with a fixed spread pricing may still enjoy the same transaction cost fixed by their brokers (which is normally lower than the floating spread pricing in high volatility situations).

The disadvantage with fixed spread is that requote and slippage may occur. Requote refers to when your broker requests you to accept a new price due to price changes in the market and Slippage refers to when your order was executed at a price different from the intended price. During high volatility and low liquidity situation, requote and slippage may occur more often than usual with fixed spread brokers. Furthermore, fixed spread brokers may charge a commission on top of the spread charge for certain currency pairs. This will increase the cost of trading.

Floating spread.

Contrary, a floating spread (also known as a variable spread) will change according to market conditions. The floating spreads will widen or tighten based on the supply and demand of the overall market.

Pros and Cons of Floating Spread.

With floating spreads, the advantage is that there is no requote issue, and slippage issues are less likely to happen. This is because spreads are already quoted according to the market price movement. Furthermore, in a market that is less volatile and has high liquidity, traders usually get to enjoy a tighter spread with floating spread pricing compared to fixed spread pricing. Brokers who charge floating spreads generally do not charge commission as well.

The disadvantage of floating spreads is that the transaction costs vary for every trade. It makes calculating the transaction costs more difficult. At times of high volatility and low liquidity, the floating spreads will widen to reflect the changes in the market, which can lead to higher execution costs for traders. Hence, with floating spreads, it is also important to keep an eye on any announcement or event that may cause higher market volatility.

Fixed Spread vs Floating Spread in table.

For a summary of how fixed spread and floating spread differ, you can refer to the table of comparison below:

Fixed Spread.

Floating Spread.

Could face requotes.

No risk of requotes.

More likely to be exposed to slippage.

Slippage is less likely to happen.

Transaction costs are predictable and consistent.

Transaction costs fluctuate with market sentiment.

Spread value remains at the fixed value regardless of the market’s supply and demand.

Spread can tighten and widen rapidly according to the market’s supply and demand.

Broker may charge commission on top of spreads.

The broker normally do not charge a commission.

How to choose?

Fixed spread and floating spread have their advantages and disadvantages. Choosing one over another will depend on a trader’s trading strategy.

In general, traders with smaller capital, who trade less often and are less sensitive to the intraday market movement will benefit from fixed spread pricing. Traders with larger capital often trade during peak market hours (when spreads are tightest) and are more sensitive to the intraday market movement will find floating spreads better for them.

Traders who want to avoid requotes and fast trade execution will also prefer floating spreads.

VCPlus like many other forex brokers uses floating spreads to allow traders to execute trades quickly. The spread range with VCPlus for major currency pairs is as low as 1.5 pips. They also have a cap of a maximum of 8 pip spread. Get started now by opening an account .


Spreads in forex trading refer to the difference between a currency pair's bid and ask (buy) price. It is a small cost charged by some brokers. There are 2 types of spread offered by brokers in the forex market: fixed spread and floating spread. When opening a trading account with a broker, traders must be clear on which type of spreads the broker offers and choose according to their trading strategies.

Spread forex 8

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Forex Spread.

Started By:


| Reward Discussion.

Looking through the API docs and dont seem to be able to find out how / where the spread (in pips usually) is calculated or set for the Forex data. Does anyone know how to do this?


The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by QuantConnect. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. QuantConnect makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances. All investments involve risk, including loss of principal. You should consult with an investment professional before making any investment decisions.


The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by QuantConnect. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. QuantConnect makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances. All investments involve risk, including loss of principal. You should consult with an investment professional before making any investment decisions.

Hey Greg! The TradeBars (seconds, minutes) use the midpoints of the bid-ask pricing. To get the true-spread on the day you'd have to use tick data for the backtest.

You can apply a slippage factor to your trades which would model the effect of spread without needing to use tick data. This would be a "custom transaction model" which has a method "GetSlippage".

I'd recommend checking out the university for examples of using a custom transaction model. Our FX data (and spread) is provided by FXCM.


The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by QuantConnect. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. QuantConnect makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances. All investments involve risk, including loss of principal. You should consult with an investment professional before making any investment decisions.

Thanks Jared! I'm taking a look at the CustomTransactionModel example. Just a heads up that sample does not compile as it is - looks like there are missing methods that the ISecurityTransactionModel Interface specifies. This wont prevent me from my analysis but wanted to let you know.

In the Lean project from github I see there is already a custom ForexTransactionModel - when I AddSecurity(SecurityType.Forex. ) does this automatically use the ForexTransactionModel or do I have to specify this as the TransactionModel to use?

Also was not aware that FXCM went to a commission based trade instead of a bid/ask spread and this is accounted for in the ForexTransactionModel.

The on the first override of ForexTransactionModel.GetOrderFees (approx line 114) this essentially asks my next question - how to handle this change in a backtest environment (i.e. using bid/ask spread up until the point in time when the commissions replaced the spread). Do you have any thoughts on how one might compensate for this?

Thanks again for your time, Greg.

No problem Greg, we're here to help. I've fixed the custom transaction model QCU algorithm.

I'd suggest handling it how I specified above: using second/minute data, which is always the midpoint, and then applying your own fixed spread/slippage on that. I've attached a simplistic example with the "minimum viable slippage model" :)

I've set it to 20 slippage per "unit" purchased to exaggerate the effect (dollars per share/euro per eurusd)


The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by QuantConnect. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. QuantConnect makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances. All investments involve risk, including loss of principal. You should consult with an investment professional before making any investment decisions.

Thanks Jared! That'll get me going! Appreciate your help!!

Hi, I have a few classes coded using the FXCM Api ( ForexConnect API ) and I'd like to migrate them to QuanConnect. It's not being easy so far. Particularly the order creation logic. In ForexConnect I would create a Market order specifying: the number of lots (1 lot = 1000 units ), the stop loss and limit (take profit) values in pips. I was looking at the "OrderTicketDemoAlgorithm" class and I'm confused. On a long trade I'd put my stop loss below the market value and my take profit above. But the examples on that class seems to be doing the opposite. Also the comments "When placing a long trade, the stop price must be above current market price". Can you please throw some light on this?. Thanks.

Welcome @nsampietro! We don't have a single order which allows stop-loss/take profit behavior, but you can replicate it with three orders: e.g.

1. Your market order for 1000 EURUSD. 2. Take profit - a sell limit order for -1000 EURUSD which will sell the holdings when a price is reached. 3. Stop loss - a -1000 quantity EURUSD stop market order for less than your market fill price.

"When placing a long trade, the stop price must be above current market price" -> This means when placing a stop which has a positive quantity (not talking about the holdings).


The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by QuantConnect. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. QuantConnect makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances. All investments involve risk, including loss of principal. You should consult with an investment professional before making any investment decisions.

Thanks Jared, you are my hero. Pass the order creation I now have another question. I'm trying to understand the "Overall Statistics" values. Perhaps I should explain myself with and example. Imagine I have an algorithm that returns this values:

STATISTICS:: Total Trades 32 STATISTICS:: Average Win 0.67% STATISTICS:: Average Loss -0.61% STATISTICS:: Compounding Annual Return -32.497% STATISTICS:: Drawdown 5.500% STATISTICS:: Expectancy -0.347 STATISTICS:: Net Profit -3.387% STATISTICS:: Sharpe Ratio -3.267 STATISTICS:: Loss Rate 69% STATISTICS:: Win Rate 31% STATISTICS:: Profit-Loss Ratio 1.09 STATISTICS:: Alpha 0 STATISTICS:: Beta 0 STATISTICS:: Annual Standard Deviation 0.09 STATISTICS:: Annual Variance 0.008 STATISTICS:: Information Ratio 0 STATISTICS:: Tracking Error 0 STATISTICS:: Treynor Ratio 0 STATISTICS:: Total Fees $64.00.

This algorithm is trading 1 lot (quantity=1000) of EURUSD at a time. Now, I run again the same algorithm, same period, same symbol, but now trading 10 lots at a time . This are the results:

STATISTICS:: Total Trades 32 STATISTICS:: Average Win 7.30% STATISTICS:: Average Loss -3.93% STATISTICS:: Compounding Annual Return 1034.751% STATISTICS:: Drawdown 27.700% STATISTICS:: Expectancy 0.428 STATISTICS:: Net Profit 23.733% STATISTICS:: Sharpe Ratio 2.097 STATISTICS:: Loss Rate 50% STATISTICS:: Win Rate 50% STATISTICS:: Profit-Loss Ratio 1.86 STATISTICS:: Alpha 0 STATISTICS:: Beta 0 STATISTICS:: Annual Standard Deviation 1.154 STATISTICS:: Annual Variance 1.331 STATISTICS:: Information Ratio 0 STATISTICS:: Tracking Error 0 STATISTICS:: Treynor Ratio 0 STATISTICS:: Total Fees $64.00.

I guess, my question is, how come only the quantity traded can affect so drastically the statistics?. More important, I think that the algorithm makes profit on both cases, even though, the first results doesn't seems to show it. I created a "Custom log" of the trades, calculating the number of pips I collect (or loss ) on each Trade (two orders) . This is what I got:

-------------------------------------- Trades ---------------------------------- # OpenTime CloseTime Type Result 1 1/5/2022 3:11:00 AM 1/5/2022 4:58:00 AM SHORT -18.79p (loss) 2 1/7/2022 4:31:00 AM 1/7/2022 4:58:00 AM SHORT -6.57p (loss) 3 1/9/2022 6:37:00 PM 1/11/2022 5:00:00 AM SHORT -50.66p (loss) 4 1/12/2022 2:48:00 PM 1/13/2022 4:58:00 AM SHORT -19.36p (loss) 5 1/14/2022 3:24:00 PM 1/15/2022 4:58:00 AM SHORT -33.80p (loss) 6 1/15/2022 2:40:00 PM 1/16/2022 4:58:00 AM SHORT 20.17p (win) 7 1/16/2022 9:02:00 PM 1/18/2022 5:00:00 AM SHORT -71.51p (loss) 8 1/21/2022 7:16:00 PM 1/22/2022 4:58:00 AM LONG -24.73p (loss) 9 1/22/2022 6:46:00 PM 1/23/2022 4:58:00 AM SHORT 236.11p (win) 10 1/23/2022 10:38:00 AM 1/25/2022 5:00:00 AM SHORT 115.70p (win) 11 1/26/2022 1:16:00 AM 1/26/2022 4:58:00 AM SHORT 15.22p (win) 12 1/26/2022 5:12:00 AM 1/27/2022 4:58:00 AM LONG 62.76p (win) 13 1/27/2022 2:13:00 PM 1/28/2022 4:58:00 AM LONG 44.08p (win) 14 1/29/2022 12:11:00 AM 1/29/2022 4:58:00 AM SHORT 60.09p (win) 15 1/29/2022 10:08:00 PM 1/30/2022 4:58:00 AM SHORT -38.01p (loss) 16 1/30/2022 6:02:00 PM 2/1/2022 5:00:00 AM SHORT 10.64p (win) ------------------------------------------------------------------------------- Total LOSS (pips) 263.437735, Total WIN (pips) 564.764520 -------------------------------------------------------------------------------

And ,as I excepted , I got exactly the same results trading 1 or 10 lots. what I'm missing here ?

Spread forex 7

When do Forex Spreads Peak?

Having a spread that is as low as possible can be hugely beneficial to you in trading. The main point is that finding one of the low spread forex brokers and understanding the answer to the question, when do forex spreads widen ? can save you a lot of money.

Here we will address the answer to this question as well as provide some of the best tips on how to keep your spread as low as possible. Let’s get started.

Table of Content.

When do forex spreads widen?

There are many reasons why spreads may be higher at some times than others. Here are some of the key reasons why you may see a spread widen on a forex pair you are trading.

Breaking News, Natural Disasters, Economic and Political Events.

Important news is likely to widen the spread on a pair in many cases. This is not always because of the news itself but instead, because of the uncertainty it provokes among traders and in the market . Breaking news, data releases of importance, natural disasters, political events such as Brexit, the US Presidential Election, and more, can influence the market.

Any of these events tend to have a volatile impact on the market as trading happens in all directions. It is this volatility that in turn can widen the spread. Many experienced traders aware of these situations may even choose these times to avoid trading and opening new positions.

As a whole, these kinds of events can be challenging moments to navigate the markets and spreads for all traders.

Certain Times of trading.

The time of the day is also well known to impact spreads and cause them to widen. As an example, you will be able to see that spreads widen towards the end of the trading week . This coincides with the close of the session on Wall Street and volume trade is generally low at this time. The low volume causes spreads to widen.

Something similar also occurs with the trading period moves from one market to another . For example when Tokyo trading closes, and London trading opens, spreads will be wider at the crossover. These are the time periods used to work on system maintenance, and make other adjustments from the broker and bank side. Therefore, you will see an increased spread until everything is set up.

Low Liquidity Markets.

As you can gather from the points mentioned above, it is clear that spreads get wider when trading volumes are low and the market is not active . This means market liquidity is low at these times.

This low liquidity also applies to lesser traded forex pairs like minor and exotic pairs. These will typically have wider spreads almost all of the time than major currency pairs simply due to the levels of market liquidity. Having said that, the forex market is known as the most liquid of financial markets ahead of the stock, and commodities market so you should always be able to find a relatively tight forex spread.

The same logic though can also be applied to stocks, commodities, and other assets. Those traded at higher volumes will generally have tighter spreads .

How Spread widening influences trades.

It is true that sometimes traders will not even recognize the impact a spread is having on their trade. In reality though, a widening spread is increasing your trading cost and is actually the main cost you incur on a trade.

There are even cases where a very big move in the spread can trigger a margin call from your broker. It is in your best interest then to always keep a close eye on your spread to get a good understanding of your trading costs.

When do spreads widen: tips.

With an understanding of when spreads widen, here are some of the best tips to help you combat this and do your best to optimize your trading environment by keeping costs as low as possible.

Trade during the busiest sessions . These are the most liquid and it is well known that the London and US trading sessions provide for the tightest spreads. With this, you should also try to trade the most liquid forex pairs . This most often means major forex pairs as mentioned for the best spreads.

Exotic currencies also have the lowest trading volume and highest spreads. For that reason, you should make sure you are only trading them if you really want to since they are often from developing countries. You should also be sure to keep up to date with market conditions , news, and events which you can do with the help of an economic calendar, videos, news, and other resources from any top broker.

If you really want to find the best brokers with the lowest spread then you can also check here for our lowest spread forex brokers top ten to help you get started.

When do forex spreads widen: FAQ.

What does a large spread indicate?

A large spread can occur for many reasons as we have detailed above. The end result though will ultimately be, higher costs for you, and an increase in revenue from the broker.

Spread forex 6

Forex Trading with Standard Account.

The value is given for 4-digit quotes. In 5-digit quotes the fourth digit after a comma is indicated (0.0001). In 3-digit quotes - the second digit after a comma (0.01). For example, in EURUSD quote - 1.36125; in USDJPY quote - 101.852.

Swap Free option is not available for trading on "Forex Exotic", Indices instruments, Energies and Cryptocurrencies.

Notice that in MT5 a commission is charged when you open a deal. In the Trade window for your open position the profit doesn’t include the commissions.

Frequently asked questions.

What is Forex trading?

Forex, also known as the foreign exchange market or FX market, is the world's most traded market, with a $5.1 trillion turnover per day. In simple words, Forex trading is the process of converting one country's currency into the currency of another country, aiming to make a profit from the changes in its value.

Indices vs. Forex: What is the difference?

Volatility. The Forex market is highly volatile. You need to predict the movements of a single currency pair, which can be influenced by numerous factors. On the contrary, when trading indices, you predict broad movements of a certain stock market, which is less volatile. Liquidity. Some stock market indices are less liquid than the Forex market (which is the largest and most liquid market globally). Time strategies. Indices trading may be more suitable for long-term traders. On the other hand, Forex trading tends to be more convenient for short-term traders who prefer to profit from small price changes. Leverage. In FBS, Forex trading has the maximum possible leverage – 1:3000. Indices are traded with leverage up to 1:33. Please keep in mind that it is better to choose trading instruments depending on your trading strategy, level of knowledge, understanding of the particular market, and risk tolerance.

What determines a spread in Forex trading?

A spread can be narrower or wider depending on a currency pair, Forex trading hours, and market conditions. At FBS, you can choose trading instruments with spreads most suitable for your needs: a floating spread from 0.5 points, fixed spread from 3 points, and zero spread.

What causes a high spread in Forex?

Spreads usually widen with the increase in volatility or low liquidity caused by out-of-hours trading. FBS offers a competitive spread list with a floating spread from 0.5 points, fixed spread from 3 points, and zero spread. Start trading Forex on favorable terms now.

How to reduce a spread in Forex trading?

A spread usually indicates a level of volatility. The more volatile the Forex market, the wider the spread gets, especially when a news release affects currencies. However, the most promising trades happen during higher volatility. At FBS, you can open trading accounts with a floating spread, fixed spread, and zero spread. Choose a currency pair most appropriate for your trading strategy and make the most of volatility.

Which Forex currency pair has the lowest spread?

Generally, the EURUSD pair has the lowest spread. At FBS, you can trade EURUSD starting from 0 pips with an ECN account.

How to start Forex trading with a broker?

The very first step is to choose a reputable Forex broker. You can join FBS, a legitimate online broker regulated by IFSC, CySEC, ASIC, and FSCA. Learn the essentials and watch videos about Forex from FBS market experts, test your skills on a Demo account, and enter the trading world with ease.

What are the advantages of Forex trading?

The Forex market is one of the easiest markets to enter with a relatively small deposit to start, flexible trading hours, and higher trading volume. FBS, an online Forex broker, offers the most beneficial spreads starting from 0.5 points for volatile Forex pairs, such as EURUSD, XAUUSD, GBPUSD, USDJPY, and AUDUSD. Learn what moves the Forex market and start your trading journey with FBS now.

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Spread forex 5

What Is the Bid and Ask in Forex? [2022 Update]

Like any financial market the Forex market has a bid ask spread. This is simply the difference between the price at which a currency pair can be bought and sold. This is what accounts for the negative number in the “profit” column as soon as you place a trade.

Before we go any further let’s define the two terms, “bid price” and “ask price”.

Bid Price – Used when selling a currency pair. It reflects how much of the quoted currency will be obtained if buying one unit of the base currency.

Ask Price -Used when buying a currency pair. It reflects the amount of quoted currency that has to be paid in order to buy one unit of the base currency.

Note: The bid price will always be smaller than the ask price.

Remember from the lesson on Forex currency pairs that the base currency is the one in front while the quote currency is the second. So using the example of EURUSD, the Euro is the base currency and the US Dollar is the quote currency.

It sounds tricky but it’s actually quite simple. It’s essentially how much of one currency you can get for the other and vice versa. The most important thing to remember is that the bid price is used for selling while the ask price is used when buying.

At the end of the day all of these intricacies are taken care of for you by your broker. All you need to know is whether you want to go short (sell) or go long (buy)and your broker does the rest.

Which Currency Pairs Have the Lowest Spreads?

It’s important to have an understanding of which currency pairs have the best (lowest) spreads when trading. While the major currency pairs and even some crosses have decent spreads, some of the more exotic currency pairs can have wide spreads, creating a large deficit as soon as you enter a trade.

The currency pairs with the lowest spreads are those with the largest daily volume. Essentially we’re talking about the major currency pairs, which are:


These currency pairs typically have the lowest spreads, with EURUSD, GBPUSD and USDJPY being the lowest of them all.

One advantage to trading the higher time frames, which is what I teach on this site, is that the bid ask spread isn’t quite as important as if you were trading the lower time frames. This is because on the larger time frames we’re interested in the larger moves and also making fewer trades. Compare this to the day trader who can make dozens of trades in a single day and may only be in a trade for a matter of minutes.

Make no mistake though, the spread on some of the less-liquid currency pairs can be significant and should certainly be considered before taking a trade, even when trading the higher time frames.

The Bid Ask Spread During Different Trading Sessions.

We all know that the Forex market is a global market consisting of different trading sessions. These sessions are:

The bid ask spread for a currency pair can vary depending on the current trading session. For the most part the bid ask spread will be the lowest during the London and New York sessions as these carry the largest trading volume.

However there is a three hour window that occurs immediately after the New York session closes and before Tokyo opens in which the spreads can considerable. This is especially true for some of the currency crosses and exotic currency pairs but can also effect the major currency pairs.

Although the Sydney session opens as soon as New York closes, it isn’t nearly as liquid as the New York session and therefore produces much larger spreads. It isn’t until Tokyo comes online three hours later that volume picks up and most spreads return to normal.

It’s important to keep this in mind if you plan on trading during this three hour window. In fact as a general rule you should always check the bid ask spread before entering a trade regardless of the current trading session.

In Summary.

Before we close out this lesson, here are a few key points to keep in mind when it comes to the bid ask spread.

The bid price is used when selling a currency pair The ask price is used when buying a currency pair The major currency pairs generally have the lowest spreads The bid ask spread for most pairs is considerably larger during the three hours immediately after the New York session Always check the bid ask spread before placing a trade.

I hope this lesson has helped you to better understand the Forex bid ask spread as well as when to take extra care and watch for larger-than-usual spreads.

Now that we have a better understanding of the two prices that make up the Forex bid ask spread, let’s take a look at how the spread is represented in the next lesson.

General FAQ.

What is the bid in Forex?

The bid is the price buyers are willing to pay for a market.

What is the ask in Forex?

The ask is the price sellers are willing to take for it.

What is the spread in Forex?

The spread is the difference between the bid and the ask price. In Forex, that spread is represented by pips.

About Justin Bennett.

Justin Bennett is an internationally recognized Forex trader with 10+ years of experience. He's been interviewed by Stocks & Commodities Magazine as a featured trader for the month and is mentioned weekly by Forex Factory next to publications from CNN and Bloomberg. Justin created Daily Price Action in 2014 and has since grown the monthly readership to over 100,000 Forex traders and has personally mentored more than 3,000 students. Read more.

Private Trading Community.

Forex Beginner Lessons.

Forex Trading for Beginners Forex Factory Calendar MetaTrader 4 Forex Basics Long or Short? What is a Pip in Forex? What is the Bid and Ask in Forex? Japanese Candlestick Charting Currency Pairs Forex vs Stocks Forex Market Hours Supply and Demand in Forex Forex Support and Resistance How to Draw Trend Lines What is Technical Analysis? How to Use Moving Averages How to Use Fibonacci Levels Forex Chart Patterns What is a Forex Strategy? Trading Strategies for Beginners Bullish and Bearish Flag Patterns Double Top Pattern Double Bottom Pattern Inverse Head and Shoulders Pattern.

Disclaimer: Any Advice or information on this website is General Advice Only - It does not take into account your personal circumstances, please do not trade or invest based solely on this information. By Viewing any material or using the information within this site you agree that this is general education material and you will not hold any person or entity responsible for loss or damages resulting from the content or general advice provided here by Daily Price Action, its employees, directors or fellow members. Futures, options, and spot currency trading have large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. This website is neither a solicitation nor an offer to Buy/Sell futures, spot forex, cfd's, options or other financial products. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed in any material on this website. The past performance of any trading system or methodology is not necessarily indicative of future results.

High Risk Warning: Forex, Futures, and Options trading has large potential rewards, but also large potential risks. The high degree of leverage can work against you as well as for you. You must be aware of the risks of investing in forex, futures, and options and be willing to accept them in order to trade in these markets. Forex trading involves substantial risk of loss and is not suitable for all investors. Please do not trade with borrowed money or money you cannot afford to lose. Any opinions, news, research, analysis, prices, or other information contained on this website is provided as general market commentary and does not constitute investment advice. We will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from the use of or reliance on such information. Please remember that the past performance of any trading system or methodology is not necessarily indicative of future results.

Spread forex 4

Forex Pricing.

We try to keep our spreads low and are transparent about our pricing. You'll never be blindsided by hidden fees and we don't charge commission. That way, you’ll know the price for each trade upfront.

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Forex trading involves risk. Losses can exceed deposits.

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Average Spreads are calculated for the 4 weeks ending on the last day of every month. Spreads can vary depending on market conditions. They can be lower during normal conditions or higher during times of increased volatility or low liquidity. When you trade with us, Trading.com is your counterparty. Your trades are matched and additional exposure above predefined thresholds is hedged with our liquidity providers at current market spreads. During volatile and illiquid conditions, our providers quote higher spreads, which in some instances, we're forced to pass on to you.

What is spread?

Forex dealers quote two prices for currency pairs. The 'bid' is the maximum price a buyer on the market is willing to pay for a pair. The 'ask' is the minimum price a seller is willing to accept.

Essentially, the 'bid' is the price you can sell the base currency at and the 'ask' is the price you can buy it at. The 'ask' is higher than the 'bid'.

The difference between the two prices is known as the 'spread'. It is the cost to trade a pair.

Let's say, you wanted to trade EURUSD, which had a 'bid' price of 1.17590 and an 'ask' price of 1.17601. The spread for this trade would be 1.1 pips.

Trade with low spreads and no commission.

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Forex trading involves risk. Losses can exceed deposits.

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Spread forex 3

How to trade forex online.

The forex market is the most active in the world, with billions of dollars on the move every day. This guide explains how you can become a part of it.

James is a lead editor for Invezz, where he covers topics from across the financial world, from the stock… read more.

Updated: Oct 12, 2022.

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68% of retail CFD accounts lose money.

In this beginner’s guide we explore the basics of forex, provide a starting point for how to trade forex, and offer useful information like how the market works, to the different ways to speculate on currency prices.

In order to get started in forex trading, you first need to understand two fundamental pieces of information first: what the market is and how does it work, and how to interact with it to perform trades.

What is the forex market?

The forex market (also known as fx or foreign exchange) is a global marketplace where national currencies are exchanged. Because the nations now trade worldwide cross-border, currency exchange is vital to the functioning of all markets. They are more liquid than other markets, like stocks or bonds, which makes them fast to trade. Currencies trade against each other as ‘pairs’, such as GBP/USD or EUR/GBP.

How does the forex market work?

The forex market operates through many currency ‘pairs’ where each currency’s value is given relative to another. In order to buy one currency you have to sell a different one, and the prices change according to supply and demand. This creates the price changes.

The most widely traded currency pair in the world is EUR/USD. That means that if you buy it, you’re buying the Euro and selling the US Dollar. The more people that do so, the ‘stronger’ (more expensive) the Euro becomes relative to the Dollar, and vice-versa.

Since there is so much volume, any change in value tends to be small and the market deals in fractions of a cent. To make money out of these tiny changes, traders use leverage in order to make trades big enough to turn a profit.

What are forex brokerages?

Forex brokers are essentially platforms that allow traders to interact with the market. They provide access to live forex rates, analytics, charting, indicators, and news based tools so that traders can assess the way the market is moving. In the past, these would have been actual people who perform a trade for you, however modern technology has made retail-trading accessible to all via forex apps.

When a trade is placed, a broker executes the trade ‘communicating’ it with the wider exchange market. Live data and systems reconcile the price change so it reflects on the entire market, so that the latest prices are updated. This is happening all the time, via thousands of brokers, across millions of transactions, consistently, in real-time.

Centralised systems operate cross-border, and brokers allow retail traders like you and me to interact with that system in order to profit from the free market.

How to trade forex online – a step-by-step guide.

The forex market can look intimidating but the act of trading is fairly straightforward. This step-by-step guide takes you through the basics of how to get started.

Find a broker. You have to place trades through a broker. Look for one that’s regulated and which has a good reputation. Then you need to create an account, which means providing some personal information, and deposit some money into it before you can do anything else. Choose a currency pair. The first decision you have to make is which coins you want to buy and sell. Each currency pair falls into one of three camps, which are known as ‘majors’, ‘minors’, and ‘exotics’. The major pairs are the US Dollar with other leading currencies, like the British Pound or the Euro. It’s best to start with these as they’re easiest to understand and have the most trading volume. Choose your trading method. There are two main ways to trade forex: on the ‘spot’ market or with contracts for difference (CFDs). Practically, these are almost identical but CFDs are a bit easier to get to grips with for beginners. You can be ‘long’ or ‘short’ a currency pair with CFDs and you can see profit/loss and settle your trades all in the same currency (normally USD). Decide whether to go long or short. Research the factors that affect the price of the two currencies you’re exposed to and use that to decide which one is likely to do better. If you’re trading the USD/GBP pair and you expect the dollar to perform better, you should ‘long’ (buy) the pair, for example, while if you think the pound might do well instead, then ‘short’ (sell) it. Set your position size. In the forex market the minimum trade size is normally $1,000, which is known as a ‘micro lot’. The standard lot size is $100,000 and you might find some platforms that offer ‘nano’ lot sizes that are just $100. Most traders don’t actually put this amount of money down every time they open a position, though, instead you can put a smaller amount down and use leverage to get to at least the value of a micro lot. Execute trade. All that’s left is to execute the trade. You should see it show up as one of your open positions, and you can monitor its fluctuations in real time. Each point of movement in forex is known as a ‘pip’. Pips normally refer to $0.0001 and are how we monitor currency price changes. Remember that if you’re using leverage to multiply the size of your trade, even a single pip can be important. (Optional) Set order limits. Stop loss limits are trades that execute automatically whenever the price hits a certain level and are particularly useful in the forex market where you’re using leverage and need to manage your risk carefully. You can set limits above your buy price to close your positions and lock in profits at a certain point or set them below in order to reduce your losses if the price falls dramatically.

Trading forex for beginners.

The most important thing to do before you start is research. The forex market is fast-moving, works differently, and is affected by very different factors compared to other asset classes like stocks or commodities. Keep reading to find out what else you need to keep an eye on.

What to do before starting to trade.

There’s a lot more to forex trading than just buying and selling pairs. You should set guidelines for yourself and make sure you’re prepared before you put any money on the line. Here’s a checklist of things to do before you get going.

Research the currency pair. Make sure you understand the factors that affect how currencies rise and fall in relation to each other. For example, when each country releases economic data like interest rates or its balance of payments that might impact the value of its currency. Read up on forex terminology. The foreign exchange market has its own language and you need to know what it all means. Here’s a quick run down of the key terms and you can follow the links to learn about each in more detail. Pip stands for ‘percentage in point’ and is the smallest amount a currency price can change. For pairs that are denominated in US Dollars, it refers to $0.0001. A lot is the size of your trade and is usually made up of a fixed amount of currency. The standard size is $100,000 but there are now smaller lot sizes available, all the way down to $100. The majors are the most popular currency pairs that make up the vast majority of forex trading volume. The six pairs that make up the majors include the US Dollar with the Euro, Japanese Yen, British Pound, Swiss Franc, Australian Dollar and Canadian Dollar. The minors are all other combinations of leading currencies Exotics are pairs that include much smaller currencies, such as the Norwegian Krone or Thai Baht. They tend to be harder to trade and the price is more volatile. Base and quote currency simply refers to the two currencies in a pair, such as USD/GBP. In that example, USD is the base and GBP is the quote. Set a budget. Never risk more than you can afford to lose. It’s a good idea to set yourself some limits on how much you want to spend before you start. That way, you won’t be tempted to overreach or chase losses if things turn against you. Decide on a trading strategy. Forex traders fall into two camps depending on whether they base their decisions on technical or fundamental analysis. Technical is favoured by the most active traders, who study price data in order to predict future moves. The alternative is a more fundamental approach, where you use economic indicators such as interest rates or inflation to guide you. Choose a broker. Every broker is different and has its own pros and cons. You can find one with low trading fees or one with a set of the most advanced trading features. Decide what’s most important to you and use that to help pick a broker.

The different ways to trade.

When it comes to the act of trading itself, there are a few ways to get involved in the forex market. Brush up on all of them by reading the list below so that you’re informed enough to decide what’s best for you.

‘Spot’ trading CFDs . Contracts for difference are contracts between you and your broker that represent the price of a particular asset and the ‘spot’ price is the current market price. When you trade a CFD your profit is the difference between the spot price when you bought the CFD compared to that at which you sell it. They’re ideal for short term traders and popular in the forex market, because you can use them to open and close positions quickly, and use leverage to make bigger bets each time. Learn about the best cfd trading brokers here. Spread betting. When you spread bet you make a prediction that the price is going to move in a certain direction and stake a fixed amount per point of movement. Your profit is the stake multiplied by the number of points moved (and it also works the other way: if you’re wrong the loss is the stake times by the movement). Learn about the best spread betting brokers here. Futures contracts. A futures contract is an agreement to buy an asset at a fixed price at a set date in the future. The key point to remember is that as soon as you enter into a futures contract you’re obligated to buy the currency on the specified date. Although they’re more traditionally used in the commodities market, futures are an ideal way to trade if you’re expecting something to have a significant impact on the price in the near future.

Should I start trading forex now?

It depends on your level of trading expertise and knowledge of how the market works. Forex trading can have a steep learning curve and so can be risky if you don’t know what you’re doing. To help you decide whether forex is for you, here is a summary of its most important pros and cons.


It’s a highly active market so there is always someone on the other end of the trade You can trade all sorts of different currencies, from the most mainstream to smaller, exotic pairs There are a lot of potential trading strategies and you can pick one that suits you.