Understanding Bid, Ask, and Spread
The bid-ask spread is a cost every trader pays on every trade. Understanding it helps you choose better instruments and manage your entry and exit prices.
Basics · May 25, 2026 · 4 min read
The bid price is what buyers are willing to pay; the ask price is what sellers want. As a trader, you buy at the ask and sell at the bid. The spread — the difference between these two prices — is an instant cost you pay the moment you enter any trade.
How Spread Affects Your P&L
If EUR/USD has a bid of 1.1050 and an ask of 1.1052, the spread is 2 pips. The moment you buy at 1.1052, your position is immediately worth 1.1050 (the bid). You are instantly down 2 pips. For scalpers and high-frequency traders, minimizing spread is critical. For longer-term swing traders, a 2-pip spread matters much less on a 100-pip trade.
Variable vs Fixed Spreads
ECN brokers often offer variable (floating) spreads that widen during low liquidity or major news events. Market makers may offer fixed spreads that remain constant. Neither is universally better — it depends on your trading style and when you trade. Spreads typically widen dramatically around major economic releases and at the start and end of trading sessions.
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