Forex Spreads Explained: The Hidden Cost of Every Trade
By Forexiz Team
Every financial market has a spread — the gap between the price you can buy at (ask) and the price you can sell at (bid). In forex and CFD trading, the spread is your primary transaction cost. Understanding it is essential for profitable trading.
What Is the Spread?
When you look at EUR/USD on Forexiz, you'll see two prices: the bid (the price to sell) and the ask (the price to buy). The ask is always higher than the bid. The difference is the spread.
Example: EUR/USD bid = 1.08500, ask = 1.08520. The spread is 2.0 pips. When you buy EUR/USD, you enter at 1.08520. For your trade to break even, price must rise by at least 2.0 pips to 1.08520. The spread is the cost you pay to enter the trade.
Why Spreads Vary
Liquidity
More liquid instruments have tighter spreads. EUR/USD (the world's most traded pair) has spreads as low as 0.2 pips during peak hours. Exotic pairs like USD/TRY might have spreads of 20+ pips because fewer people trade them.
Time of day
Spreads are tightest during the London–New York overlap (12:00–16:00 UTC) when liquidity is highest. During the Asian session or after the NY close, spreads widen because fewer participants are trading.
News events
Around major data releases (NFP, CPI, central bank decisions), spreads can widen dramatically — sometimes 5–10× their normal level. This is because market makers increase the spread to protect themselves from extreme volatility.
Wide spreads during news events can turn a winning trade into a losing one. If you enter a trade at an inflated spread, you're starting deeper in the red.
How Spreads Affect Different Trading Styles
Scalpers
Scalpers trade for 2–10 pips of profit. For a scalper, a 2-pip spread is a huge cost — it might represent 50% of the target profit. Scalpers need the tightest spreads possible and should only trade during peak liquidity hours.
Day traders
Day traders target 20–80 pips. A 2-pip spread is a smaller percentage of the profit (2.5–10%). Spreads matter less but still add up over many trades.
Swing traders
Swing traders target 100–500+ pips. A 2-pip spread is negligible (under 2% of the target). Spreads are the least concern for swing traders, which is why this style is most forgiving for beginners.
Tips to Minimise Spread Impact
- Trade during peak liquidity hours (London–NY overlap).
- Stick to major pairs with naturally tight spreads.
- Avoid trading during the first 5 minutes of a major news release.
- Choose a trading style that matches your spread tolerance — if you're scalping, spread costs must be calculated into every trade plan.
- Use limit orders when possible to avoid entering at the worst price.
Reading Spreads on Forexiz
On the Forexiz Markets page, every instrument displays the live bid and ask prices. The spread is visible in real time. When you open the trading panel for any instrument, you can see the current spread and how it affects your entry price. Monitor spreads over different times of day to understand the rhythm of each instrument.