What is Spread

Bid/Ask:

All Forex prices are quoted with two prices.  Those are… Bid and Ask.

The Bid price is the best available price where we can Sell the base currency against quote currency.

The Ask price is the best available price where we can Buy the base currency against quote currency.

The Bid price is always lower than the Ask price.

The difference between the Bid and Ask price is called “Spread”.

Spread(Bid-Ask)

In the above Screen shot of EUR/USD chart, you can see that 1.36870 is the Bid price and 1.36887 is the Ask price.  The difference between the last two decimals is 17.As this is a 5 digit chart, the difference is 1.7, which is called Spread here.

Most of the Brokers provide their services by collecting this Spread only.  Some Brokers collect little commissions but Spreads will be lesser compared to other Brokers.

Note: In Major Pairs, Spread is very nominal in between 1 to 3 Pips

           In Minors or Cross Pairs, Spread is also nominal in between 1.5 to 4 Pips

          But in Exotic Pairs Spread is usually large.  It moves in between 8 to 30 Pips.

Because of this reason only, trading Exotic Pairs is not suggested in the previous post.

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