Trading glossary
What is the spread?
The spread is the difference between the bid (sell) price and the ask (buy) price, a cost paid on every trade.
Every quote has two prices. You buy at the higher ask and sell at the lower bid. The gap between them is the spread, and it is one of the main costs of trading.
Spreads widen when liquidity is thin, such as around major news, at the daily rollover or on less traded instruments.
How traders use it
- Account for the spread when placing stops near a level.
- Be careful trading right around news or the daily close, when spreads can widen sharply.
- Remember most charts plot the bid price, so a buy stop can trigger before the chart appears to touch it.
Example
A broker quotes EURUSD at 1.08500 bid and 1.08510 ask, a 1-pip spread. A trade bought at 1.08510 is immediately 1 pip down, because closing it straight away would sell at 1.08500.
Frequently asked questions
Why does the spread change?
It reflects liquidity. When fewer orders are available, the gap between buyers and sellers widens.
Do charts show the bid or the ask?
Most platforms plot the bid by default.
Related terms
Educational content only, not financial advice. Chart patterns describe probabilities, not certainties, and every pattern can fail. See our disclaimer.