What are Forex Spreads?

January 16, 2014

What is a Forex Spread?

A spread is essentially the difference between the bid and the ask price.

As traders always trade one currency for another, Forex currencies are always quoted in terms of what the price is currently compared to another. To make things easy they are written in pairs.

For example: AUD/USD (Australian Dollar/US Dollar) – AUD is the ‘base currency’ and USD is called the ‘counter’. If it took $1.5 AUD to buy $1 USD this would be written as 1.5/1.

How is spread calculated?

Forex quotes always come with a ‘bid’ and ‘ask’ price. The ‘bid’ is the price at which the market is willing to buy the base currency (AUD in our example), while the ‘ask’ is the price at which the market is willing to sell the base currency (AUD) in exchange for the counter currency (USD).

Ask Price – Bid Price = Spread

For example, the AUD/USD is currently priced at 0.80413/0.80419 (Bid/Ask).

0.80419 – 0.80413 = 0.00006 or 0.6 pips

Feeds can come through from as many as 70 institutions when viewing spreads on the MetaTrader 4 platform. This variety allows us to offer industry-leading spreads as low as 0.0 pips on RAW accounts, and 1.0 pips on standard accounts. To see a sample listing of our spreads and a live chart comparison, please see our Forex Spreads page. 

 

Social

Free Daily Market Update

Live Spreads

SymbolBidAskSpread

Spread

Sign up to the latest forex news and daily FX trading setups

Get started with a FREE $50,000 demo account