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Market Basics

What Is the Spread

The spread is the gap between the price you can buy at and the price you can sell at, and you pay it on every trade. This paper shows you where the two prices are on your screen, why a fresh trade opens showing a small loss, how the spread is paid inside one real trade, what it costs at three sizes, and when it gets wider than usual.

Difficulty
Beginner
Reading time
6 min
Pages
9
Reviewed by
Saman Rahbar

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Two prices on the board

Your platform does not show one price for a currency pair. It shows two, like the board at a currency booth: one price it will sell you the pair at, and a slightly lower one it will buy it back at. The gap between them is the spread. You always meet the one that is worse for you: you buy at the higher price and sell at the lower. So buy and sell again a second later, with nothing happening in between, and you are down the difference. On this board that is 0.9 pips — a pip is the fourth decimal place of the price, the smallest step most people count in. Yours is in the contract specification your broker publishes for every symbol.

This is why a new trade shows a small loss the moment it opens, which alarms every beginner exactly once. Nothing has gone wrong. You bought at the higher price, the platform values what you hold at the lower one, and the first movement your way goes on closing that gap before it goes into profit.

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