Spread margin

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What is a spread

When looking to trade currency, there are always two prices. The price you can buy for is on the right side and it is called the ask or the buy price. The price you can sell at is on the left side and is called the bid or the sell price.

Remember when you buy a pair you are buying the base currency and selling the counter and when you sell a pair you are selling the base and buying the counter.

The difference between these two prices is called the spread, which is the difference between what you pay to buy a currency to what you get when you sell it.

The spread is essentially the cost of your trading. You may come across brokers advertising low spreads but be sure to check what other commissions and costs other brokers may be charging.

Example

For example a broker pays a price of 1.2700 for buying or selling a currency which will then allow you to buy for 1.2701 or sell it at the price of 1.2699. So the spread margin in this case would be at 0.2 pips.

When you choose a trade, the broker automatically receives that paid spread.