What is a spread?

What it is

The spread is the difference between the price you pay to buy a currency pair (the ask) and the price you receive when you sell it (the bid). It's the primary way brokers make money on forex trades — and it's a cost you pay on every single trade you open.

If EUR/USD is quoted at 1.10003 bid / 1.10006 ask, the spread is 0.3 pips. The moment you open a trade, you're already 0.3 pips in the red before the market has moved at all.

How it works

Every forex price has two sides. The bid is what the market will pay you (what you sell at). The ask is what the market charges you (what you buy at). You always buy at the higher price and sell at the lower price — the broker captures the difference.

Types of spread

Fixed spread: Stays the same regardless of market conditions. Predictable, but usually wider than variable spreads.
Variable spread: Fluctuates based on liquidity and volatility. Tighter during normal conditions, much wider during news events, market open/close, or low liquidity periods.
Raw spread: The interbank spread with no markup, plus a small fixed commission per lot. Typically the most cost-effective for active traders and EAs.

A worked example

EUR/USD spread: 0.8 pips. You open 1 standard lot (100,000 units).

Spread cost: 0.8 pips × $10 per pip = $8 per trade
You open and close: $8 × 2 = no, you only pay the spread once on opening
Your EA makes 100 trades per month: 100 × $8 = $800/month in spread costs

On a raw spread account with 0.1 pip spread + $3.5 commission per lot per side: (0.1 × $10) + $3.5 = $4.50 per trade round-trip. Considerably cheaper for high-frequency EAs.

Why it matters

For manual traders who make a handful of trades per week, spread is a minor consideration. For automated EAs that might place dozens or hundreds of trades per month, the spread is a significant ongoing cost that directly affects profitability. A scalping EA making 5-pip gains can be entirely wiped out by a 1-pip spread on every trade.

Common misconceptions

A tighter spread isn't always better. Raw spread accounts charge a commission. Whether raw spread + commission is cheaper than a no-commission account depends on your trading volume. For high-frequency EAs, raw spread usually wins.
Spreads widen during news events. A broker advertising 0.6 pip EUR/USD spread might quote 5–10 pips during the NFP release. If your EA trades during high-impact news, this matters significantly.
Spread affects your stop loss. If you set a 10-pip stop loss on a pair with a 2-pip spread, the market only needs to move 8 pips against you to hit it.

The Karnek note

Karnek is read-only monitoring for MetaTrader - it watches every account you run, live on one dashboard, and alerts you the moment something stops. It never trades and never asks for a trading password.

See it in Karnek: see how Karnek works.