EURUSD on the screen reads 1.08432 by 1.08440. Buy and you pay 1.08440, the ask. Sell and you receive 1.08432, the bid. The 0.8 pips between them is the spread, and it explains the small red number that appears the instant any position opens: the platform marks you against the price you could exit at, and that price is a spread away from the one you entered at. Nothing is broken. You have simply paid the toll.
Two prices, one market
Every dealer market works this way. Whoever quotes you stands ready to buy at one price and sell at a slightly higher one, and lives in the gap. In spot forex the quoting chain runs from banks and liquidity providers through your broker to your screen, with each layer either passing the spread through or adding to it. The spread is compensation for the risk of holding the other side of your trade, which is why it behaves like a risk gauge: calm, liquid conditions compress it, and uncertainty stretches it. The depth behind those quotes varies enormously by pair, a subject we take further in our piece on forex liquidity.
What the spread costs in cash
Pips become meaningful when converted to money. On one standard lot of a USD-quoted pair, a pip is worth about $10, so a 0.8 pip spread costs roughly $8 every round trip. Trade one lot twice a day and that is around $320 a month before a single pip of market movement has gone your way or against you. On a mini lot the figures divide by ten, which is why spread barely registers for small swing traders and dominates the economics of scalping. The arithmetic scales with frequency, not with skill: the spread is paid on winners and losers alike.
This is also why the choice between account types matters. A standard account bundles everything into a wider spread. A raw account passes the underlying market spread, often a fraction of a pip on majors, and charges a fixed commission per lot instead. Neither is automatically cheaper; the honest comparison is total cost per lot, spread plus commission, measured on the pairs you actually trade. How brokers construct those numbers is laid out in our guide to spreads, markups and commissions.
Why spreads move
The advertised spread is a fair-weather figure. Through the London and New York sessions, majors trade near their tightest. In the dead hours after New York closes, liquidity thins and spreads drift wider. Around scheduled news the widening is violent: in the seconds before and after a payrolls print, a pair that usually shows under a pip can quote several, because the banks providing prices protect themselves exactly when traders most want to transact. The daily rollover around 5pm New York adds its own ritual widening, described in our rollover article. A stop loss resting inside that window can be triggered by the spread alone, with the mid price barely moving.
"Spreads from 0.0 pips" is a floor, never an average. Judge an account by its typical spread during the hours you trade, plus commission, and ignore the smallest number the marketing found.
Reading the spread as information
Beyond being a cost, the spread is a live message about conditions. A major pair quoting three times its normal spread is telling you liquidity has left: fills will be worse, stops less reliable, and position sizes deserve a haircut. Exotic pairs carry wide spreads permanently for the same structural reason, which changes what a sensible stop distance and target look like on them. Traders who check the spread before the entry button, the way a driver glances at the fuel gauge, avoid a whole class of expensive surprises.
Measuring what you actually pay
Platforms show the live spread, but memory flatters. The only honest record is measurement: logging spreads at your usual trading times for a couple of weeks, or using purpose-built tooling of the kind covered in our spread monitors guide. The result is often uncomfortable: an account chosen for its advertised 0.2 pips that averages 0.9 during the hours you actually trade. Costs decide long-run outcomes in trading more than most participants accept, and the spread is the one cost you pay every single time.
"Spread is the only cost you pay on every single ticket, win or lose. Scalpers understand this in their bones. Everyone else finds out at the end of the month."
— Alex Onta, Executive Director, SINGUARD
Key Takeaways
- You buy at the ask and are marked against the bid, so every position opens a spread underwater.
- On a standard lot of a USD pair, each pip of spread is roughly $10 per round trip, paid win or lose.
- Spreads widen in thin hours, around news and at rollover; a stop can be hit by the spread alone.
- Compare accounts on total cost, spread plus commission, measured during the hours you trade.
Frequently Asked Questions
Why do I open a trade and immediately show a loss?
Because you buy at the ask and the platform marks your position against the bid, the price you could sell at right now. The gap between the two is the spread, so every new position starts that distance underwater. It is a cost, not an error.
What does a 1 pip spread cost in money?
On one standard lot of a USD-quoted pair, one pip is worth about $10, so a 1 pip spread costs roughly $10 per round trip. On a mini lot it is about $1. Multiply by your trade frequency and the number stops looking small for active traders.
Are zero spread accounts really free to trade?
No. Raw or zero spread accounts pass the underlying market spread, which is rarely exactly zero, and charge a fixed commission per lot instead of a markup. The total cost is spread plus commission, and comparing accounts means comparing that total.