Bid and ask
Two prices are always quoted. The bid is what you can sell at, the ask is what you can buy at, and the ask is always higher. The difference is the spread. Buy at the ask and the position is immediately worth the bid, which is why every trade opens showing a small loss.
Turning it into money
Spread in pips multiplied by the pip value for your size. A 1.2 pip spread on one standard lot of EUR/USD costs about twelve dollars to enter. On 0.01 lots it costs twelve cents. It is charged once, on entry, not again on exit.
When it widens
Around major news releases, at the daily rollover, at the Sunday open, and on any instrument during thin hours. A spread quoted as "from 0.6 pips" is the best case in the best conditions, not what you will get at the moment a rate decision lands.
Fixed against variable
A fixed spread does not move but is set wider to cover the broker. A variable spread is tighter most of the time and can jump when liquidity thins. Neither is better in the abstract; what matters is the average you actually pay at the times you actually trade.
In short
| Bid | The price you sell at |
|---|---|
| Ask | The price you buy at, always higher |
| Spread | Ask minus bid |
| Charged | Once, on entry |
Common questions
Why does my trade start in loss?
Because you bought at the ask and the position is valued at the bid. The gap is the spread, and the trade has to move that far in your favour before it is at break-even.
Is a zero spread account really free?
No. Those accounts charge commission instead, and the honest comparison is the commission converted into pips plus the raw spread, against the all-in spread of the other account.
Should I avoid trading during news because of the spread?
That is a strategy decision, not a rule. What is true is that the spread you get during a release can be several times the one advertised, and a tight stop can be triggered by the widening alone.
Trading forex and CFDs on margin carries a high level of risk. Most retail accounts lose money. Nothing on this page is financial advice or a recommendation to trade.