What is the spread in forex? It is the gap between the price you can sell at (the bid) and the price you can buy at (the ask). If EUR/USD shows 1.13995 / 1.14010, the spread is 1.5 pips, and you pay it the moment you open a trade.
The spread looks tiny on screen. However, it is a real cost on every trade, and it grows with your lot size and your trade count. This guide shows how to read it, how to price it in dollars, and when it gets wider.
Key takeaways
- Spread = ask price minus bid price. Dollar cost = spread in pips × pip value × lots.
- A 1.5-pip spread costs $3 on 0.20 lots of EUR/USD. With a 10-pip stop, that is 15% of your planned risk.
- Spreads are set by your dealer and can widen in volatile or thin markets, so check the live spread before every entry.
What is the spread in forex? The short answer
The spread in forex is the difference between the ask and the bid on a currency pair. You buy at the higher ask and sell at the lower bid. As a result, every new position starts slightly negative by the size of the spread.
Two terms first. The bid is the price at which the dealer will buy from you, so it is your selling price. The ask is the price at which the dealer will sell to you, so it is your buying price.
In US retail forex, you trade against your dealer, not on an exchange. The CFTC’s forex customer advisory makes this point directly.
In addition, the disclosure required under CFTC Rule 5.5 says your dealer may set prices as spreads from third-party prices. It has no obligation to keep doing so.
New to how pairs and dealers work? Start with what forex trading is and how it works.
Why the forex spread hurts most on tight stops
It is natural to think of the spread in dollars. A more useful view is the spread as a share of your planned risk. That share equals the spread in pips divided by your stop in pips, whatever your lot size.
With a 50-pip stop, a 1.5-pip spread is 3% of your risk. With a 10-pip stop, the same spread is 15%. So the shorter your trades, the more the spread decides whether your strategy works at all.
What the spread costs over a month
One trade’s spread is small. Over many trades, though, it becomes a fixed cost your strategy must beat before it makes anything.
Example: you take 40 trades a month at 0.20 lots on EUR/USD, where each pip is worth $2. At a 1-pip average spread, you pay $80, or 1.6% of a $5,000 account. At 5 pips, you pay $400, which is 8% of the account before a single winner.
How to calculate the spread in forex in 3 steps
The quotes below are example prices for illustration, not live quotes from any dealer. The method works on any platform.
Step 1: Read the bid and the ask
Your platform shows two prices for each pair. Example: EUR/USD bid 1.13995, ask 1.14010. Many charts plot only the bid, so open the order ticket to see both.
Step 2: Convert the spread into pips
Subtract the bid from the ask, then divide by the pip size. For EUR/USD, that is (1.14010 − 1.13995) ÷ 0.0001 = 1.5 pips. For yen pairs, the pip size is 0.01 instead.
Step 3: Turn the spread into dollars
Multiply the spread in pips by the pip value per lot, then by your lot size. If you need the pip value, see how to calculate pip value for every pair type.
Worked example: spread cost on two pairs
- EUR/USD, 0.20 lots, 1.5-pip spread: 1.5 × $10 × 0.20 = $3.00. If you buy at 1.14010, the bid must rise 1.5 pips before you are back to breakeven.
- USD/JPY, 0.31 lots, example quote 157.170 / 157.190: the spread is 2.0 pips. At 157.18, a pip is worth about $6.36 per standard lot, so the cost is 2.0 × $6.36 × 0.31 = about $3.94.
Say you risk $50 with a 20-pip stop on EUR/USD, which is 0.25 lots. A 1.5-pip spread then costs $3.75, which is 7.5% of that $50 risk. For the sizing method, read how much to risk per trade.
Forex spread cost quick-reference table
Dollar cost per trade on EUR/USD or any pair quoted in US dollars, where one standard lot equals $10 per pip.
| Lot size | 1-pip spread | 2-pip spread | 3-pip spread | 5-pip spread |
|---|---|---|---|---|
| 0.01 (micro) | $0.10 | $0.20 | $0.30 | $0.50 |
| 0.10 (mini) | $1.00 | $2.00 | $3.00 | $5.00 |
| 0.50 | $5.00 | $10.00 | $15.00 | $25.00 |
| 1.00 (standard) | $10.00 | $20.00 | $30.00 | $50.00 |
For pairs like USD/JPY or EUR/GBP, swap in that pair’s pip value. Then multiply by the spread you actually see on your platform.
When the spread in forex gets wider
Spreads are not fixed. First, they tend to rise with volatility. A Bank for International Settlements study of spreads in emerging market currencies found that volatility raises dealers’ price risk and pushes spreads up.
Second, liquidity is thinner at some hours. The BIS review of the October 2016 sterling flash event found that sterling fell about 9% against the dollar in early Asian trading. It also said the time of day made the market more vulnerable to order imbalances.
Third, major scheduled data releases can bring sudden volatility, which links back to the first point. For instance, the monthly US jobs report comes out at 8:30 AM ET, according to the BLS release schedule. Our guide to forex market hours shows which sessions overlap and when.
Common forex spread mistakes
| Mistake | Why it hurts | Fix |
|---|---|---|
| Ignoring the spread when you set a target | A 10-pip target with a 1.5-pip spread nets about 8.5 pips | Measure targets and stops from the price you actually get |
| Using very tight stops | A 1.5-pip spread is 15% of the risk on a 10-pip stop | Check the spread-to-stop ratio before you enter |
| Entering right at a major release | Spreads can widen and fills can slip when volatility jumps | Know the release times, such as 8:30 AM ET for US jobs data |
| Judging cost by one quote | Your dealer can change prices and spreads at any time | Note the spread you paid on each trade in your journal |
| Trading thin pairs or thin hours | Less liquidity tends to mean wider spreads | Trade liquid pairs during liquid sessions |
For more on avoidable errors, see 5 costly mistakes forex traders make.
Put a spread check in your trading routine
If you work 9-to-5, you likely trade before work or in the evening. Those windows are fine, but check the live spread before each order instead of assuming it is normal. If the spread is far wider than usual, skip the trade or wait.
Example rule: no entries from 8:25 to 8:45 AM ET on jobs report days. Write the rule into your trading routine so you do not decide in the moment.
Finally, record the spread on every trade. After 20 or 30 trades, you will know your real average cost. Our guide on how to keep a trading journal shows which fields to track.
Frequently asked questions
Is a lower spread always better?
Lower is better if everything else is equal. However, some accounts charge a commission on top of a tighter spread. Add both together to compare the true cost per trade.
Do I pay the forex spread when I close a trade too?
You pay it once per round trip. You buy at the ask and later sell at the bid, so the spread is the gap between the two. In other words, it is already built into your result when the trade closes.
Why is the spread wider on some pairs?
Liquidity is a big factor. The US dollar was on one side of 89.2% of all FX trades in April 2025, according to the BIS Triennial Survey. Less traded pairs have fewer buyers and sellers, so their spreads tend to be wider.
Can my dealer change the spread?
Yes. The required CFTC disclosure says your dealer may offer different prices to different customers on its own terms. That is one more reason to use a registered dealer, covered in our guide on why forex regulation matters.
What is the spread in forex? The bottom line
The spread is the gap between bid and ask, and you pay it on every trade. Its real weight depends on your stop size and how often you trade. Price it in dollars, compare it to your risk, and check it live before each entry.
At All Win Academy, risk management is where every student starts. We also run live trading sessions on Zoom five days a week, and every student gets 1-on-1 mentoring. Explore our forex trading courses to get started.
Written and reviewed by Sai Donti, founder of All Win Academy. Last updated October 2, 2026.
Trading forex involves substantial risk of loss and is not suitable for every investor. This article is for educational purposes only and is not financial advice. Past performance does not guarantee future results.
