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What is Spread?

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What is Spread?


A Forex spread is the difference between the bid price and ask price, and it is where companies get their commission from every position opened by a trader. Each company offers a different spread on each currency pair, and some charge extra commission per position.


Some companies offer very low spread while others offer much higher ones, and usually traders are looking for the lower spreads when trading Forex because a lower spread allows them to open bigger positions with smaller amounts of money.


A lower spread however does not always mean better trading. Trading conditions have many sides to them, including leverage, trading tools, customer service of a company and many more. Another important thing is whether commission will be charged for the spread or not. Sometimes a company will offer lower spreads but ad commission.


Zero Spreads are offered by some forex brokers, where the lowest spread is 0.0 pips. However in most cases this applies to ‘floating’ spreads, which are non-fixed spreads that can move up or down according to market movements, so the 0.0 spread can be on average at 0.5 pips.


And in some cases there may be a commission charged on the side of the 0.0 pip spread, so when a company offers a zero spread, it is important to look out for all the other factors which could make up for that zero spread.