What is a Spread?

Spread = The difference between buy price and sell price

Example: EUR/USD

On your trading platform:

• BUY (Ask): 1.0852
• SELL (Bid): 1.0850
• Spread: 2 pips

What this means:

• To buy, you pay 1.0852
• To sell immediately, you get 1.0850
• You start -2 pips (the spread = your cost)

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Why Spreads Exist

Broker's Profit

Spreads = How brokers make money (instead of/in addition to commissions)

Example:

• You buy EUR/USD at 1.0852
• Broker buys from market at 1.0850
• Broker keeps 2-pip difference
• Multiply by thousands of traders = profit

Think of it like currency exchange at airport: Buy rate and sell rate always have a gap.

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Types of Spreads

1. Fixed Spread

What: Spread stays the same always

Example: Libertex

• EUR/USD spread: Always 1.8 pips
• Doesn't matter if it's 3am or London open
• Predictable costs

Pros: ✅ Know costs in advance ✅ No surprises ✅ Good for beginners

Cons: ❌ Usually wider than variable at quiet times ❌ Less competitive

2. Variable (Floating) Spread

What: Spread changes based on market conditions

Example: XTB, eToro

• EUR/USD: 0.8-2 pips (changes constantly)
• Tight during London/NY session
• Wider at night or during news

Pros: ✅ Can be very low (0.8 pips) ✅ Competitive during active hours

Cons: ❌ Unpredictable ❌ Widens during news (can be 10+ pips) ❌ Harder to calculate costs

3. Raw Spread + Commission

What: Near-zero spread + small commission per trade

Example: Exness Zero Account

• EUR/USD spread: 0.0-0.2 pips
• Commission: $3.50 per lot
• Total cost: ~0.7 pips equivalent

Pros: ✅ Lowest total cost for active traders ✅ Transparent pricing

Cons: ❌ Need to calculate commission + spread ❌ Usually higher minimum deposit ❌ Confusing for beginners

Beginners: Start with fixed or standard variable spreads (simpler)

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Typical Spreads by Asset

Major Forex Pairs (Most Liquid)

Pair	Typical Spread
EUR/USD	0.8-1.5 pips
GBP/USD	1.0-2.0 pips
USD/JPY	0.8-1.5 pips
USD/CHF	1.5-2.5 pips

Why low: Highest trading volume

Minor Forex Pairs

Pair	Typical Spread
EUR/GBP	1.5-3.0 pips
EUR/AUD	2.0-4.0 pips
GBP/JPY	2.0-5.0 pips

Why higher: Less trading volume

Exotic Pairs (Avoid as Beginner)

Pair	Typical Spread
USD/TRY	20-100+ pips
EUR/ZAR	50-200+ pips
USD/MXN	10-50 pips

Why very high: Low liquidity, higher risk

Other Assets

Asset	Typical Spread
Gold (XAU/USD)	$0.20-$0.50
Oil (Crude)	$0.03-$0.10
Bitcoin CFD	$20-$100
S&P 500 Index	0.5-1.5 points

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How Spreads Affect Your Trading

Example: EUR/USD Trade

Trade details:

• Spread: 1.5 pips
• Position: 1 mini lot ($1/pip)
• Buy at: 1.0850 (actually paying 1.0851.5)
• Immediate position: -$1.50

To break even: Price must move 1.5 pips up

To profit $10: Price must move 11.5 pips up (10 pips + 1.5 spread)

Impact on Different Trading Styles

Scalping (Very Affected)

Strategy: Quick trades, 5-10 pip targets

Spread: 1.5 pips

• Target: 10 pips
• Actual profit after spread: 8.5 pips
• Spread = 15% of profit!

Verdict: Needs very tight spreads (< 1 pip)

Day Trading (Moderately Affected)

Strategy: Trades lasting hours, 20-30 pip targets

Spread: 1.5 pips

• Target: 25 pips
• Actual profit: 23.5 pips
• Spread = 6% of profit

Verdict: 1-2 pip spreads acceptable

Swing Trading (Minimally Affected)

Strategy: Trades lasting days, 100+ pip targets

Spread: 1.5 pips

• Target: 150 pips
• Actual profit: 148.5 pips
• Spread = 1% of profit

Verdict: Spreads almost negligible

Beginners: Swing trading = spreads matter less

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Calculating Spread Costs

Formula:

Cost per Trade = Spread × Position Size × Pip Value

Example 1: EUR/USD

• Spread: 1.5 pips
• Position: 0.1 lots (mini lot)
• Pip value: $1
• Cost: 1.5 × 1 = $1.50 per trade

If you make 20 trades/month: $30/month in spreads

Example 2: GBP/JPY

• Spread: 3.0 pips
• Position: 0.05 lots (0.5 mini lots)
• Pip value: $0.50
• Cost: 3.0 × 0.5 = $1.50 per trade

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When Spreads Widen

1. Major News Events

Before/during:

• NFP (Non-Farm Payrolls)
• FOMC announcements
• Central bank decisions

Normal: 1.5 pips During news: 5-20 pips

Tip: Avoid trading 30 min before and after major news

2. Low Liquidity Times

Asian session (low volume):

• EUR/USD: 2-3 pips (vs 1 pip during London)

Weekends/holidays:

• Markets closed or very wide spreads

Tip: Trade during London (8am-4pm GMT) or NY (1pm-9pm GMT) sessions

3. Market Volatility

High volatility = Wider spreads

Example: Flash crash, war news, etc.

• Normal spread: 1.5 pips
• During panic: 10-50 pips

Tip: Don't trade during extreme volatility as beginner

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Spread vs Commission

Broker Models

A. Spread-Only (Most Common for Beginners)

Examples: Libertex, eToro, XTB standard accounts

• No commission
• Wider spreads (1.5-2 pips)
• Simple pricing

Good for: Beginners, small accounts

B. Commission + Raw Spread (ECN)

Examples: Pepperstone, IC Markets, Exness Zero

• Tiny spreads (0.0-0.5 pips)
• Commission: $3-$7 per lot round-turn
• More transparent

Good for: Active traders, larger accounts

C. Hybrid

Examples: Some accounts mix both

• Medium spreads (1 pip)
• Small commission ($1-2/lot)

Which is Cheaper?

Calculate total cost:

Spread-only:

• EUR/USD: 1.5 pips = $15 per standard lot

Commission + raw spread:

• EUR/USD: 0.2 pips + $3.50 commission = $5.50 per standard lot

Winner: Commission model (for standard lots or larger)

BUT: Beginners trade micro/mini lots → spread-only is simpler

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Choosing a Broker by Spreads

What to Look For

✅ Transparent: Clearly shows live spreads ✅ Competitive: EUR/USD under 2 pips ✅ Regulated: FCA, CySEC, ASIC ✅ No hidden fees: Check overnight swaps, withdrawals

Best Spreads for Beginners 2026

Broker	EUR/USD Spread	Model
XTB	0.8-1.2 pips	Variable
Libertex	1.8 pips	Fixed
eToro	1.0-1.5 pips	Variable
Exness	0.0-1.0 pips	Raw + Commission
Pepperstone	1.0-1.5 pips	Variable (Standard)

Compare All Brokers →

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Spreads and Profit Targets

Rule of Thumb

Your profit target should be AT LEAST 10× the spread

Examples:

• EUR/USD spread: 1.5 pips → Target: 15+ pips ✅
• GBP/JPY spread: 3 pips → Target: 30+ pips ✅
• USD/TRY spread: 50 pips → Target: 500+ pips ⚠️

Why: Spread becomes negligible

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Hidden Spread Costs

1. Slippage

What: Your order fills at worse price than requested

Example:

• You click buy at 1.0850
• Order fills at 1.0852
• 2 pips slippage (in addition to spread)

When: Fast markets, news events

Protection: Use limit orders (not market orders) when possible

2. Swap Fees (Overnight Fees)

What: Interest for holding position overnight

Example: EUR/USD

• Long position: -$0.50 per day per mini lot
• Short position: +$0.30 per day

Tip: Check swap rates before holding overnight

3. Weekend Spreads

Some brokers widen spreads before weekend close

• Friday 4:50pm: Normal spread (1.5 pips)
• Friday 4:55pm: Spread widens (5-10 pips)

Tip: Close positions before Friday close or early Monday

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FAQ

Q: Can I negotiate spreads? A: No for retail accounts. Professional accounts with large capital (€50k+) might get better pricing.

Q: Are tight spreads always better? A: Usually yes, but check regulation, safety, and total costs (commissions, swaps) too.

Q: What's a "good" spread? A: EUR/USD under 2 pips is acceptable for beginners. Under 1 pip is excellent.

Q: Do spreads matter for long-term investing? A: Less important for buy-and-hold. More important for active trading.

Q: Why do some brokers offer "zero spreads"? A: They charge commission instead. Total cost is spread + commission (calculate both).

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