What is the spread in trading?
In one line: The spread is the gap between the price you can buy at (the ask) and the price you can sell at (the bid). It's a cost on every trade.
A simple example
EUR/USD shows two prices: 1.0850 / 1.0851. You can sell at 1.0850 (the bid) and buy at 1.0851 (the ask). The gap is 0.0001, which is 1 Pip.
If you buy one mini lot and close it right away, you lose that 1 pip, about $1. That's the spread. Every trade starts slightly behind by this amount.
For a stock quoted at $25.00 / $25.02, the spread is 2 cents a share. On 100 shares, that's $2.
Why it matters
The spread is a cost you pay going in, so it changes your math. If your target is 10 pips and the spread is 2, you need price to move 12 to get there. On short trades with small targets, the spread can eat a big piece of the plan.
That's one reason very fast trading is harder than it looks. A 1-pip spread on a 40-pip target is small. On a 4-pip target it's a quarter of the trade. The pip value calculator helps you see the cost in dollars.
When spreads widen
Spreads aren't fixed. They usually get wider:
- Right before and after big news, like CPI or an FOMC decision.
- When markets are quiet, such as late Friday or around the forex daily rollover near 5 pm ET.
- On less-traded pairs and smaller stocks.
More on timing in the best time to trade forex.
A common mistake
Setting a stop or target without the spread in mind. Charts usually show the bid price. A sell trade closes by buying at the ask, so its Stop loss can get hit even when the chart line never touched it. If your stop sits right at a level, the spread alone can trigger it. Give it a little room.
Before you trade a new market, note its normal spread. If it's suddenly much wider, that's a reason to wait.
Questions
Is a lower spread always better?
For costs, yes. But a market with a tiny spread can still be a poor fit if it doesn't move the way your plan needs.
Do "zero commission" brokers make money from the spread?
Often, yes. The cost is built into the gap between bid and ask instead of charged as a fee.
Why is the spread so wide right now?
Usually low activity or big news. Fewer buyers and sellers means a bigger gap between their prices.
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