What is Spread in Forex

 

Now let us take a look at what a spread is. The spread is the difference between the sell (also called ask) price and the buy (also called bid) price. Two prices are given for a currency pair. The spread stands for the difference between what your broker is willing to give to buy from you the trader, and what the same broker would charge to sell to a trader.

Therefore we can say the spread is the amount of pips between the asking price and the bidding price. Let us take for example, your broker may be paying a price of 1.3600 for selling or buying. The broker will then allow you to buy the currency for 1.3601 or sell it for 1.3599. The basic thing is the spread always stays around the actual price that the forex broker willing to pay. So that when you buy, you will get one end of the spread and when you sell you get the other end of it, this also applies the other way round. When eventually you close your trade, you will have always been charged the spread.

Let us see an example of the calculating the spread for the EURUSD. The first thing is finding the buy price at 1.35640 and then subtract the sell price of 1.32626. When we are done with the subtraction,the remainder is a reading of .00014. Traders should not forget that the pip value is then shown on the EURUSD as the 4th digit after the decimal, so that the final spread calculated is1.4 pips.

Now that we have known how to calculate the spread in pips, let us take a look at the actual cost which traders incur.

 

There are several factors that influence the size of the bid-offer spread. The most important is currency liquidity. Popular currency pairs are traded with lowest spreads while rare pairs raise dozen pips spread. Next factor is amount of a deal. Middle size spot deals are executed on quotations with standard tight spreads; extreme deals – both too small and too big – are quoted with broader spreads due to risks involved.

 

The lowest spread is usually peculiar to the most popular instruments Floating changes in this type of spread regularly and completely depend on the situation on the market at the moment. This spread is not profitable in some strategies, and it can as well significantly hamper their testing., trading spread is a very important issue....

 

The spread always stays around the actual price that the forex broker is paying. So when you buy, you get one end of the spread and when you sell you get the other end of it, and vice versa. By the time you close your trade, you will have always paid the spread.

 

If you're really understand about how forex trading works, you absolutely will choose the right leverage that really suits to your capital. Just calculate it first before you're going to make a trading account. There's 100$ bonus and 35% tradable bonus in HiWayFX that will help you move further in your trading career.

 
AndikaAnjani:
If you're really understand about how forex trading works, you absolutely will choose the right leverage that really suits to your capital. Just calculate it first before you're going to make a trading account. There's 100$ bonus and 35% tradable bonus in HiWayFX that will help you move further in your trading career.

Correct, make sure you're manage it right. Because leverage is the advantage of forex trading nowadays so you don't need to supply $100k for 1 lot trading anymore.

World Rally Forex in HiWayFX is opened! Test your skill and grab their rewards.

 

Well, according to the FreshForex encyclopedia, The spread is the amount of pips between the bidding price and the asking price is called the spread. The spread is what forex brokers use to make money on every forex trade placed through their network. For example, the forex broker may be paying a price of 1.3600 for buying or selling. The broker will then allow you to buy the currency for 1.3601 or sell it for 1.3599.

The spread always stays around the actual price that the forex broker is paying. So when you buy, you get one end of the spread and when you sell you get the other end of it, and vice versa. By the time you close your trade, you will have always paid the spread.

 

As it is stated, Every market has a spread and so does Forex,It is imperative that new Forex traders become familiar with spreads as it is the primary cost of trading between currencies. A spread is simply defined as the price difference between where a trader may purchase or sell an underlying asset. Traders that are familiar with equities will synonymously call this the Bid: Ask spread.

 

Also it is important to check your broker's potential spread when trading!

 

For beginners Before you understand what a spread is you should first of all understand that in the foreign exchange market prices are represented as currency pairs or exchange rate quotation where the relative value of one currency unit is denominated in the units of another currency. An exchange rate, applied to a customer willing to purchase a quote currency is called BID. It is the highest price that a currency pair will be bought. And a price of quote currency selling is called ASK. It’s the lowest price that a currency pair will be offered for sale. BID is always lower than ASK. The difference between ASK and BID is called spread. It represents brokerage service costs and replaces transactions fees. Spread is traditionally denoted in pips – a percentage in point, meaning fourth decimal place in currency quotatio

 

The spread is the quantity of pips among the bidding fee and the asking rate is referred to as the unfold. The unfold is what forex brokers use to make money on every foreign exchange trade located through their network. For instance, the forex broker may be paying a price of one.3600 for purchasing or selling. The dealer will then allow you to buy the foreign money for 1.3601 or promote it for 1.3599.

Reason: