When you look at a forex price on any broker platform, you'll see two numbers. EUR/USD might show 1.10008 / 1.10016. The first number (1.10008) is the bid — the price you can sell at. The second (1.10016) is the ask — the price you can buy at.
The difference between them is 0.8 pips. That's the spread. And you pay it the moment you enter any trade, regardless of what happens next.
Why the spread exists
The broker is the intermediary between you and the interbank market. When you buy EUR/USD, the broker is simultaneously fulfilling that order, either from its own book or by routing to a liquidity provider. The spread is the broker's compensation for providing that service.
In the interbank market between large financial institutions, spreads on EUR/USD can be as tight as 0.1 pips or less. Retail brokers widen this spread before passing it to clients. The margin between the interbank rate and what you see is where the broker makes money on each trade.
Some brokers add a separate commission on top of a tighter spread (common in ECN/STP models). Others build their entire revenue into the spread with no separate commission (common in market-maker models). Neither is inherently better for the trader — the total cost is what matters.
What the spread costs in practice
Say you buy 1 mini lot of EUR/USD (10,000 EUR) with a 1-pip spread. The pip value on a mini lot is $1. You immediately start the trade 1 pip ($1) in the red.
For the trade to be profitable, price needs to move more than 1 pip in your favor. If you're targeting 20 pips, the spread represents 5% of your target. If you're targeting 200 pips, the spread is 0.5% of your target and largely irrelevant.
This is why the spread matters much more to short-term traders than long-term ones.
A scalper targeting 5-10 pips per trade on EUR/USD with a 1-pip spread needs a 10-20% winning margin just to cover costs. Every trade starts with a 10-20% handicap relative to the target. Run 50 trades like that and the cumulative spread cost is $50 on a mini lot, regardless of whether the trades were winning or losing.
A swing trader targeting 100+ pips per trade on the same spread pays 1% or less in spread costs relative to their target. The friction exists but doesn't dominate their math.
Fixed vs variable spreads
Brokers offer two main spread structures.
Fixed spreads stay the same regardless of market conditions. EUR/USD might be quoted at a 2-pip fixed spread 24 hours a day. The predictability is useful for planning trade costs, but fixed spreads are typically wider than variable spreads during normal market hours. Market-maker brokers more commonly offer fixed spreads.
Variable spreads (also called floating spreads) change based on market conditions. During the London-New York overlap, when EUR/USD liquidity is highest, variable spreads can be as tight as 0.2-0.5 pips. During off-hours (Asian session for EUR/USD, or on Sunday evening), they can widen to 3-5 pips or more. Around major news events, they can spike significantly higher for a few seconds to minutes.
For most retail traders, variable spreads result in lower average costs during their active trading hours, since active trading hours overlap with high-liquidity periods. Variable spreads require awareness of when widening occurs — particularly around scheduled economic events.
Spread widening around news events
The most significant spread widening happens in the minutes immediately before and after major economic releases. NFP (Non-Farm Payrolls), CPI, and central bank rate decisions regularly cause EUR/USD spreads to widen to 3-10 pips for a brief window as liquidity providers pull their tight quotes and recalibrate after the announcement.
If you have an open position when a major release hits, the spread widening doesn't affect you (you're already in). But entering a trade in the 2-3 minutes before a major release can mean paying 5+ pips in spread instead of 0.5 pips, which is a meaningful cost difference.
For beginners, the practical rule is simple: check the economic calendar before each session and don't enter new trades in the 5 minutes before or immediately after a high-impact release. Wait for the volatility to settle and spreads to normalize before entering.
How different brokers compare
Spreads vary significantly between brokers and account types. Here's a realistic picture for EUR/USD during the London session:
A market-maker broker with fixed spreads might quote 2-3 pips consistently. Convenient and predictable, but more expensive over time than variable spread alternatives.
An ECN broker with variable spreads and a commission might show 0.1-0.3 pip spreads plus $3-7 commission per 100,000 units traded. For a mini lot ($1/pip), a round-trip commission of $6-14 plus a 0.2-pip spread ($0.20) totals roughly $6.20-14.20 per trade. Compare this to a 2-pip market-maker spread: 2 pips × $1/pip = $2 per trade. The ECN model is cheaper only for larger position sizes where the tight spread saves more than the flat commission costs.
This math matters when choosing a broker for your intended trading style and size. For traders starting with micro lots, the market-maker spread model often ends up being cheaper than ECN commissions. For larger positions, ECN tends to win.
Spread and your trading strategy
The spread is a fixed cost per trade. Its impact on your results depends entirely on how many trades you take and what you're targeting per trade.
High-frequency trading (many trades, small targets): spread costs accumulate fast and dominate your results. Each additional pip of spread on a 5-pip target is a 20% increase in the cost-to-target ratio. Tight spreads are non-negotiable.
Day trading (moderate frequency, 20-50 pip targets): spread costs are meaningful but manageable. A 1-pip spread on a 30-pip target is a 3.3% cost. Manageable with a reasonable win rate.
Swing trading (low frequency, 100+ pip targets): spread costs are minor. A 1-pip spread on a 150-pip target is 0.7%. Essentially a rounding error in the overall result.
Understanding this relationship tells you what to optimize for. A swing trader obsessing over getting the tightest possible spread is spending energy on something that barely moves their results. A scalper who doesn't compare broker spreads before choosing a platform is leaving meaningful money on the table.
Simulating spread costs in practice
One thing that trading simulators often get wrong is spread modeling. Some simulate trades with zero spread (your order fills at the exact quoted price), which teaches you that your entries are better than they actually are in a real-money environment.
Before relying on any simulator's practice results, check how it handles spread. Does it show a bid/ask spread? Does your simulated entry fill at the ask (for buys) or the bid (for sells)? If the simulator fills at the midpoint with no spread deduction, the practice P&L doesn't reflect realistic trading costs.
ChartMini's replay uses real historical data with realistic spread simulation, so the feedback you get from practice sessions accounts for the same friction you'd face in a live account.
The practical takeaway
Spread is a cost of doing business in forex. You can minimize it by choosing the right broker for your trading style and avoiding entries during high-spread periods, but you can't eliminate it. Before you start live trading, calculate how many pips per trade your strategy typically targets, check your intended broker's spread on that pair during your trading hours, and confirm the math makes sense. A 2-pip spread on a 10-pip target is a 20% cost hurdle. A 2-pip spread on a 100-pip target is negligible.
Open ChartMini TradeGame for your next practice session, and after each simulated trade, manually note the spread impact: if the trade hit a 25-pip target, how much of that was consumed by spread? Building this into your practice review builds realistic cost awareness before going live.
Common questions
Is a lower spread always better? Lower spread is better all else equal, but account types with very low spreads often have commissions that offset the savings at small position sizes. Calculate total round-trip cost (spread plus commission) rather than looking at spread alone.
Why does my broker's spread vary throughout the day? Variable spread brokers adjust pricing based on liquidity. The most liquid hours for EUR/USD (London and New York sessions) produce the tightest spreads. Lower-liquidity periods (Asian session for EUR pairs) and news events widen the spread.
Can I negotiate a tighter spread with my broker? At high account sizes or high trading volumes, some brokers offer tighter pricing. A typical retail trader starting with $1,000-2,000 is unlikely to get spread discounts. This becomes a conversation worth having after you're trading consistently profitable.
Does the spread change when I use different lot sizes? The pip value changes with lot size, but the spread in pips stays the same. A 1-pip spread on a standard lot costs $10. A 1-pip spread on a micro lot costs $0.10. The spread percentage relative to your pip target is the same regardless of position size.