A spread is the difference between the price a forex broker will pay to buy a currency pair from you and the price they will charge to sell it to you

When you trade forex, you never see a single price for a currency pair. Instead, your broker shows you two prices at the same time: a bid price (what the broker will pay if you sell) and an ask price (what the broker will charge if you buy). The spread is the gap between these two numbers, measured in pips — the smallest unit of price movement in forex, usually 0.0001 for most currency pairs.

If EUR/USD is quoted at 1.0850 bid and 1.0852 ask, the spread is 2 pips. That 2-pip difference is how your broker makes money on your trade. You pay it the moment you open a position, whether the market moves in your favor or not. The spread is a cost built into every trade you make.

Spreads vary depending on market conditions, the currency pair you are trading, and the broker you use. Major pairs like EUR/USD and GBP/USD typically have tighter spreads — sometimes as low as 1 to 2 pips during busy trading hours. Exotic pairs like USD/THB (Thai baht) or USD/ZAR (South African rand) often have spreads of 10 pips or wider because fewer traders buy and sell them.

Key Takeaways

  • A spread is the difference between the bid and ask price, and you pay it every time you open a trade.
  • Spreads are measured in pips and vary by currency pair, broker, and time of day.
  • Major currency pairs have tighter spreads than exotic pairs because they trade in higher volume.
  • Spreads widen during low-liquidity periods like early morning hours or when major economic news is released.
  • Some brokers offer fixed spreads that do not change; others offer variable spreads that move with market conditions.

Fixed spreads versus variable spreads

A fixed spread stays the same no matter what is happening in the market. If your broker quotes EUR/USD at a 2-pip spread, it will be 2 pips during the quiet Asian session and 2 pips during the busy New York close. Fixed spreads give you predictability — you know exactly what you will pay to enter a trade.

A variable spread (also called a floating spread) changes based on market activity and liquidity. During peak trading hours when many traders are active, variable spreads narrow — sometimes to 0.5 pips or less on major pairs. During slow periods or economic announcements, they widen significantly. Variable spreads can be tighter on average, but they are unpredictable.

Neither type is inherently better. Fixed spreads suit traders who want certainty and do not mind paying a slightly higher average cost. Variable spreads suit traders who are active during busy market hours and can tolerate wider spreads during quiet times.

When spreads widen and why

Spreads are widest during times when fewer traders are active or when uncertainty is high. The Asian session (roughly 10 p.m. to 7 a.m. ET) typically has wider spreads than the European or US sessions because trading volume is lower. If you trade EUR/USD at 3 a.m. ET, expect a spread of 3 to 5 pips instead of the 1 to 2 pips you might see at noon.

Economic announcements also widen spreads. When the US Federal Reserve releases interest rate decisions, or when employment data is published, brokers widen their spreads because the price can move sharply and unpredictably. A pair that normally trades at a 2-pip spread might jump to 5 or 10 pips for several minutes around the announcement.

Market stress or low liquidity in a specific pair will widen spreads too. If a currency is in crisis or a central bank makes an unexpected move, traders may stop quoting prices, and the gap between bid and ask widens as brokers protect themselves against sudden losses.

How spreads affect your trading costs

The spread is a direct cost that reduces your profit or increases your loss on every trade. If you buy EUR/USD at 1.0852 and sell at 1.0860, you made 8 pips of profit. But if the spread was 2 pips, you actually needed the price to move 10 pips in your favor just to break even — the first 2 pips went to the spread.

On a standard lot (100,000 units), each pip is worth $10 for most currency pairs. A 2-pip spread costs you $20 per trade. A 5-pip spread costs $50. If you trade 10 times a day, a 2-pip spread costs $200 daily in spread costs alone. Over a month of trading, spreads can add up to hundreds or thousands of dollars.

Scalpers and day traders — who make many small trades and rely on small price movements — are hit hardest by wide spreads. A swing trader who holds positions for days or weeks can absorb the spread cost more easily because they need larger price moves to profit anyway. The tighter your trading strategy, the more spreads matter to your bottom line.

Spreads across different currency pairs

Major pairs (EUR/USD, GBP/USD, USD/JPY, USD/CHF) have the tightest spreads because they trade in the highest volume. Millions of traders and institutions buy and sell these pairs every second, so there is always a buyer and seller ready to trade. Spreads on major pairs often range from 1 to 3 pips.

Minor pairs (EUR/GBP, EUR/JPY, GBP/JPY) trade less frequently than majors but more than exotics. Spreads typically range from 2 to 5 pips. Exotic pairs (USD/TRY, USD/MXN, USD/ZAR) have much lower trading volume, so spreads are wider — often 5 to 15 pips or more. Some exotic pairs may not have consistent pricing at all during certain hours.

Emerging market currencies and cross pairs involving them tend to have wider spreads because fewer traders participate. If you are considering trading a pair you have not seen before, check the spread your broker quotes during the time you plan to trade. A pair that looks attractive might become unprofitable once you factor in the spread cost.

How to compare spreads between brokers

Different brokers quote different spreads on the same currency pair. One broker might quote EUR/USD at 1.5 pips while another quotes 2.5 pips. Over time, that 1-pip difference adds up. To compare spreads, you need to check what each broker quotes during the time of day you actually trade.

Ask each broker for their average spread on the pairs you trade most, and ask whether that spread is fixed or variable. Also ask what happens to spreads during news events or low-liquidity periods. Some brokers publish their average spreads on their website; others will only tell you if you ask directly.

Be cautious of brokers advertising "zero spreads" or "no spreads." They typically make money through other means — a commission per trade, a markup on the price, or a wider spread during volatile periods. There is no such thing as truly free trading; the cost is always there somewhere.

Spreads and your break-even point

Before you enter any trade, you need to know how many pips the price must move just to cover the spread. If the spread is 2 pips and you want to make a 5-pip profit, the price actually needs to move 7 pips in your favor. If the spread is 5 pips, the price needs to move 10 pips.

This is why spread size matters more for short-term traders. A day trader making 5-pip trades is paying a much higher percentage of their profit to spreads than a swing trader making 50-pip trades. When you are planning your trading strategy, factor in the spread as part of your cost of doing business, not as something separate from your profit target.

Frequently Asked Questions

Why do spreads widen during news releases?

When major economic data is released, prices can move sharply and unpredictably. Brokers widen spreads to protect themselves from sudden losses. Traders also pull their buy and sell orders, reducing liquidity. The combination means the gap between bid and ask prices expands, sometimes dramatically, for several minutes around the announcement.

Can I trade with a broker that has fixed spreads if I want to scalp?

Yes, but fixed spreads are usually wider than the average variable spread during busy hours. If a fixed-spread broker quotes 3 pips on EUR/USD and a variable-spread broker averages 1.5 pips during peak hours, the variable-spread broker is cheaper for scalping. However, if you trade during slow hours, the fixed spread might be better.

Do all currency pairs have spreads?

Yes. Every forex pair has a bid price and an ask price, so every pair has a spread. The size of the spread depends on how much that pair is traded. Highly liquid pairs like EUR/USD have tight spreads; illiquid pairs have wide spreads. Some brokers may not offer certain exotic pairs at all because the spreads would be too wide to be practical.

Is a 1-pip spread actually better than a 2-pip spread?

Yes, but only if you trade frequently or with large position sizes. On a single trade, 1 pip saves you $10 per standard lot. If you trade once a month, that $10 does not matter much. If you trade 20 times a day, you save $200 daily. Over a year, tight spreads can save thousands of dollars.

What happens to spreads on weekends?

Most forex brokers do not offer trading on weekends because the major markets are closed. Some brokers do offer weekend trading on a limited number of pairs, but spreads are typically much wider because liquidity is very low. Most traders avoid weekend forex trading for this reason.