Spread definition

Spread is the difference between the bid price, the highest price a buyer will pay, and the ask price, the lowest price a seller will accept. Because you buy at the ask and sell at the bid, the spread is a cost you carry on every trade.

A tighter spread points to higher liquidity and a lower trading cost, while a wider spread points to thinner liquidity, higher volatility, or market uncertainty. A fixed spread stays the same under normal conditions; a variable spread widens and narrows with liquidity, the trading session, and major news.

The bid is sometimes called the bid and the ask is also called the offer, so the spread is the bid-offer difference. It is quoted in pips on forex pairs and in points or cents on other instruments. The wider it is, the further price must move in your favour before the trade breaks even.