What Is Spread?
The spread is the difference between the price at which you can buy and the price at which you can sell.
You will normally see:
Bid
The price available for selling.
Ask
The price available for buying.
The difference is the spread.
Example:
Bid: 1.2500
Ask: 1.2502
Spread = 2 pips.
Why Does Spread Matter?
Spread is one of the costs associated with trading.
If the spread is larger, the market needs to move further in your favour before the trade becomes profitable.
When Can Spreads Increase?
Spreads can increase during:
- Major economic news
- Low liquidity
- Market openings
- Market closings
- Highly volatile conditions
This is why traders should understand their trading costs.
Key Takeaways
- Spread is the difference between bid and ask.
- Spread is a trading cost.
- Spreads can increase during volatile or illiquid conditions.
Disclaimer
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
