What the spread is, and how to read it on the platform

The spread is the first cost you pay on every trade, and the one most people look at daily
without actually reading. Understanding it is a precondition for costing a trade correctly.

1. What it is

Every quote carries two numbers: the Bid, at which the broker buys from you, and
the Ask, at which it sells to you. The gap between them is the spread.

The direct consequence: the moment you open a buy, that position is already down by the
spread. Price has to move your way by at least the spread before you break even.

2. Which unit you are reading

This is where most of the confusion lives. Platforms usually display the spread in
points, not pips, and 1 pip = 10 points.

• EUR/USD showing “spread 12” means 1.2 pips, not 12 pips.
• On one standard lot, 1 pip ≈ $10, so 1.2 pips
  ≈ $12 per lot.
• Gold works differently: 1 lot = 100 ounces, so each cent of spread is $1 per
  lot.

3. The spread is not fixed

The number you see is the spread right now. It moves with liquidity:

• The London session — deepest
  liquidity, the tightest spreads of the day.
• Around data releases — spreads widen several times over, sometimes eightfold.
• At session changeovers — thin order books, wider spreads.

4. Why the advertised spread is not the one you get

Brokers advertise “spreads from 0.0 pips”. The word “from” carries all the weight: that is the
best case, in ideal conditions, on one instrument, on one
account type.

How to find your real number: open the platform at the hours you actually trade, write down the
spread every day for a week, and take the average. That figure is your cost.

5. The spread in the wider cost picture

A trade carries three costs: the spread on entry,
commission on an ECN account,
and overnight financing if you hold past the daily close. Comparing brokers on
spread alone compares a third of the cost.

Spread and commission are also what fund the
introducing broker’s commission — the part a rebate hands
back to you. That is why two accounts with the same spread can still leave you with different net
costs.

This article is for information only and is not investment advice. Conditions and fee levels are published by the brokers and can change at any time — check with the broker you actually use. Leveraged forex and CFD trading carries a high level of risk and can cost you your entire deposit.