Spread
The gap between the bid and the ask price - the simplest trading cost you pay on every position.
The gap between the bid and the ask price - the simplest trading cost you pay on every position.
Every forex quote carries two prices: the bid, at which your broker buys from you, and the ask, at which it sells to you. The difference between them is the spread, and because you buy at the ask and sell at the bid, you start each trade a small distance in the red. That distance is the broker's commission in disguise - it is why a 'commission-free' account still costs money to trade.
Spreads are quoted in pips and move with liquidity. Major pairs during the London-New York overlap run tight because banks are matching orders constantly; the same pair at the Tokyo close, or around a rate decision, can widen several-fold in seconds. Account type matters too: raw-spread accounts charge a separate commission but show near-empty spreads, while standard accounts bake the cost into a wider gap. Compare total cost - spread plus commission - not either number alone.
Worked example
If EUR/USD shows bid 1.0842 and ask 1.0844, the spread is 0.2 pips. Buying one standard lot (100,000 units) means you effectively enter at 1.0844 and can only exit back at 1.0842 - 0.2 pips, or about $2 on that lot, has to be covered by price movement before you break even.
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