Firstly if a Forex trader executes a forex deal that a broker or market maker has quoted on.
It usually means that a few pips will be paid away by the trader.
So to be able to take on or close the forex position they want is called the spread.
In short In quotations made by forex market makers the trading spread observed is simply defined as the difference between the bid and ask price of a currency pair.
So the bid price is the exchange rate at which the currency pair will be purchased by the market maker.
While the ask price is the exchange rate at which the currency pair will be selling.
So let suppose the EUR / USD currency pair as an example.
Can you remember that the bid exchange rate that the trader will sell is 1.05716?
While the exchange rate of the purchase is 1.05733 for the offer or order.
The trade spread is the difference between the bid or asking price.
So that would be either 0.00017 or 1.7 pips in this case.
What is spread in forex?
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