Spread
The difference between the bid and ask price, and the main cost of a trade. It is usually measured in pips.
Spreads are tightest on major pairs during the London and New York sessions and widen around news, at the daily rollover and on exotic pairs.
In practice
If EUR/USD is quoted at 1.08500 / 1.08510, the spread is 1 pip. A trade opened at that moment starts about 1 pip ($10 per standard lot) in loss. On exotics such as USD/ZAR the spread can be many times wider.
Ignoring spread on short-term trades. On a 10-pip target, a 2-pip spread takes a fifth of the potential profit.
Related terms
Bid
The price at which the market will buy from you, so it is the…
Ask
The price at which the market will sell to you, so it is the price…
Slippage
The difference between the price you expected and the price you…
Commission
A fixed fee per lot charged by some account types, usually…
Exotic pairs
Pairs combining a major currency with one from a smaller or…
Liquidity
How easily a currency can be bought or sold without moving the…
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