What is the spread in forex trading?
Written by an ex-institutional trader. A clear explanation of the forex spread: what it is, why it exists, how raw and standard pricing differ, what tight and wide spreads mean for your cost, and how it eats into every trade.
Direct answer
The spread in forex is the difference between the buy (ask) price and the sell (bid) price of a currency pair, and it is the main cost of placing a trade. If EUR/USD shows a sell price of 1.0850 and a buy price of 1.0851, the spread is 1 pip. You pay it the moment you open a trade, because you buy at the higher price and could only sell back at the lower one, so a position starts slightly in the red by the spread.
Spreads are how brokers earn on commission-free accounts, and they vary by pair, by broker and by market conditions. Major pairs like EUR/USD have the tightest spreads; exotic pairs are far wider. Raw or ECN accounts pair a near-zero spread with a separate commission, while standard accounts use a wider spread and no commission. For active traders, total cost (spread plus commission) is what matters, not the headline spread alone.
What the spread is
Every currency pair has two prices: the price you can sell at, called the bid, and the price you can buy at, called the ask. The spread is the gap between them. If EUR/USD is quoted as 1.0850 / 1.0851, the bid is 1.0850, the ask is 1.0851, and the spread is one pip.
The spread exists because the broker, and the market makers behind it, need to be paid for providing a market you can trade in instantly. They buy from sellers at the bid and sell to buyers at the ask, and the difference is their margin. For you, it is simply the cost of entry. It is quoted in pips, the standard unit of price movement, so a spread is described as 0.1 pip, 1 pip, and so on.
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Why the spread is a cost
The spread matters because you pay it on every single trade, whether the trade wins or loses. When you open a position you enter at the ask, the higher price, but you could only close it immediately at the bid, the lower price. So the moment you open, the position is already down by the spread.
Take a one-pip EUR/USD spread on a standard lot. One pip on a standard lot is worth roughly USD 10, so the trade starts about USD 10, or around AUD 15, in the red before the market has moved at all. The price has to rise by one pip just to break even. That sounds small, but a trader placing many trades pays it over and over, and it is the single most common cost people underestimate. To see the spread cost for your own profile, the total cost of trading calculator adds it up across a year.
Raw vs standard spreads
Brokers offer two main pricing models, and the difference is where the cost sits.
- Raw or ECN accounts pass through a very tight spread, often close to zero on major pairs, and charge a separate commission per trade. A typical raw EUR/USD spread is around 0.1 pip, plus a commission of a few dollars per side.
- Standard accounts charge no separate commission but build the cost into a wider spread, often around one pip on EUR/USD.
For an active trader, the raw account is usually cheaper once you add the spread and the commission together, which is why it is the default recommendation for anyone trading frequently. A standard account can be simpler for occasional trading because there is only one number to track. The key is to compare the all-in cost, not the headline spread, which the lowest spread forex brokers and best CFD brokers pages do across the major ASIC brokers.
What moves spreads
Spreads are not fixed. They breathe with the market, and a few situations widen them noticeably:
- News releases. Major scheduled events such as central-bank rate decisions and US non-farm payrolls cause spreads to widen sharply for seconds to minutes, because liquidity thins out around the uncertainty.
- Illiquid hours. The quiet window between the New York close and the Sydney open has the thinnest liquidity and the widest spreads of the day.
- The daily rollover. Spreads often widen briefly around the daily rollover time as liquidity providers reset.
- Market stress. Sudden shocks widen spreads across the board as market makers protect themselves.
This is why execution quality matters as much as the headline spread. A broker that keeps spreads stable and fills cleanly during news is worth more to an active trader than one advertising a slightly tighter average that blows out when it counts.
What counts as a tight spread
As a rough guide for the major pairs on an ASIC-regulated raw account, EUR/USD around 0.1 pip is excellent, AUD/USD around 0.2 pip is good, and anything consistently above a pip on a major is wide. Minor and exotic pairs are naturally wider because they are less liquid. The leading ASIC brokers compete hard on this: Pepperstone and IC Markets sit near 0.1 pip on EUR/USD, and Fusion Markets pairs a similar spread with the lowest commission.
Because the spread is paid on every trade, choosing a tight-spread broker is one of the few costs entirely within your control. The best forex brokers in Australia ranking compares spreads and total cost across the field, and the related basics, what is a pip, what is leverage and what is margin, round out the cost picture.
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Examples use indicative prices for illustration. Last reviewed: 2026-06-01.
Frequently asked questions
What is the spread in forex?
The spread is the difference between the buy price (ask) and the sell price (bid) of a currency pair. It is quoted in pips and is the main cost of trading. If EUR/USD has a bid of 1.0850 and an ask of 1.0851, the spread is 1 pip. You effectively pay the spread when you open a trade, because you enter at the ask and could only exit at the bid, so the position begins down by the spread amount.
Is a tight or wide spread better?
A tighter spread is cheaper and therefore better, all else equal, because the spread is a cost you pay on every trade. Major pairs such as EUR/USD have the tightest spreads, often well under one pip on a raw account. Wide spreads, common on exotic pairs or during illiquid hours and news events, increase your cost. Active traders prioritise tight spreads because the cost compounds across many trades.
What is the difference between a raw and a standard spread?
A raw or ECN account offers a very tight spread, often near zero on majors, but charges a separate commission per trade. A standard account charges no commission but builds the cost into a wider spread. For active traders the raw account is usually cheaper once you add spread and commission together, while a standard account can be simpler for occasional trading. The total cost, not the headline spread, is what decides.
Why do spreads widen?
Spreads widen when liquidity falls or uncertainty rises. The main causes are major news releases such as interest-rate decisions and US jobs data, the illiquid hours between the New York close and the Sydney open, the rollover period each day, and any sudden market stress. A spread that is 0.1 pip in calm London hours can jump several pips for a short time around a big release, which is why execution quality matters.
How much does the spread cost me?
Multiply the spread in pips by the pip value for your position size. On a standard lot, one pip is worth about USD 10, so a 1 pip spread costs around USD 10 per round trade, roughly AUD 15. On a 0.1 pip raw spread it is about AUD 1.50 plus the commission. Over hundreds of trades a year the difference between a tight and a wide spread adds up to a meaningful sum, which the total cost of trading calculator can model.
Do all forex brokers have the same spreads?
No. Spreads vary by broker depending on their liquidity providers, pricing model and account tier. The leading ASIC-regulated raw accounts quote around 0.1 pip on EUR/USD, while some standard accounts are 1 pip or more. Because spread is a core cost, comparing it across brokers matters, though you should compare the all-in cost including commission rather than the spread on its own.
