What is a Forex Spread?

A spread is the difference between the ask price, and the bid price. In other words, it is the cost of trading.

 

For example, if the Euro to US dollar is trading with an ask price of 1.1401 and a bid price of 1.14, then the spread will be the ask minus the bid price. In this case it is 0.0001. The spread of 0.0001 is equal to one Pip.

 

For Yen based currencies like the US Dollar / Japanese Yen the spread is again the difference between the ask and the bid price.

 

If the Japanese Yen to the US Dollar is trading with an ask price of 120.42 and a bid price of 120.40, then the spread will be 0.02. In this case, this is Equal to 2 pips.

 

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