💱 Explaining the Forex Spread

Forex quotes are presented with two prices: the Bid and the Ask price. The Bid price is the rate at which a Forex broker is willing to buy the base currency in exchange for the counter currency. Conversely, the Ask price is the rate at which the Forex broker is willing to sell the base currency in exchange for the counter currency.

The difference between these two prices is known as the Forex Spread and is measured in pips.

👉 Example on EUR/USD:

• Ask Price: 1.3100 | Bid Price: 1.3096
• The spread is 0.0004, or 4 pips.

Why is the Forex Spread Important?

A low spread in Forex means lower trading costs. However, the spread offered by a broker should be considered alongside other important trading factors such as:

Which Forex Brokers Offer the Lowest Spreads

ECN and STP Forex Brokers offer the lowest spreads in the Foreign Exchange market.

🔗 Read More: ►What is ECN Forex Trading

Using a Trading Rebate to Lower Spread

A Forex trader can use a Forex rebate plan to reduce trading costs. A rebate plan can lower the spread and overall trading expenses by 30% or more.

Which Forex Pairs Provide the Lower Spreads

Popular Forex pairs typically offer lower spreads. The lowest spreads are usually found in EUR/USD and GBP/USD trading.

Table: Average Retail Forex Spreads (in pips)

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🔗 Read More: » What is a Forex Account | » What are Forex Signals | » What is Forex Scalping

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What is Forex Spread