Mastering Spread(Spread): The Key to Smart Trading

Spread(Spread) is not just a term that traders should know, but a fundamental concept that directly impacts your strategy and profits. Understanding how spreads(Spread) work is like having a clear “plan” every time you place a trade.

What exactly is a spread(Spread)?

Spread(Spread) refers to the gap between the bid price (Bid) and the ask price (Ask) of any asset, such as currencies, stocks, commodities, or cryptocurrencies. It appears everywhere in financial markets.

In any perspective, the definition of spread(Spread) is the same:

• In Forex trading: the difference between the bid price (Bid) and the ask price (Ask) of a currency pair
• In stock trading: the difference between the bid price (Bid) and the ask price (Ask) of a stock
• In cryptocurrency trading: the gap between the bid price (Bid) and the ask price (Ask) of digital assets

For example, if you buy EUR/USD at 1.05680 and close the position immediately, a loss from price movement other than the spread(Spread) of more than 0.8 pips is the cost incurred from the spread(Spread) itself. This is how brokers earn revenue without relying on price speculation—like buying gold at $500 and needing to sell at $501 or higher to make a profit. The $1 difference is the spread(Spread).

What does the spread(Spread) indicate about the market?

The size of the spread(Spread) is an important meter that measures market confidence:

• Normal currency markets: spreads(Spread) are usually around ~0.001%, (high liquidity markets)
• Fragile markets: when spreads(Spread) jump to 1-2%, it indicates low participation from buyers and sellers, and a very weak market

A wide spread(Spread) = difficulty in finding buyers and sellers = low market liquidity

Spread(Spread) has two sides: Fixed vs. Variable

Traders will encounter Fixed Spread(Spread) and Variable Spread(Spread) on all trading platforms.

Fixed Spread( Spread

Definition: The broker sets the spread)Spread( in advance, and this value remains constant regardless of market volatility.

Advantages:

• Precise cost calculation because the value doesn’t change
• Know in advance how much you will pay per trade

Disadvantages:

• Frequent requotes during intense market volatility; brokers may “block” the system and force you to accept new prices )usually worse(
• Your planned strategy may break down while waiting for requote acceptance

) Variable Spread( Spread

Definition: The spread)Spread### varies according to market demand; brokers simply pass the price without controlling it.

Advantages:

• No requotes, as spreads(Spread) move naturally
• Faster execution for traders, often with lower costs during calm periods

Disadvantages:

• Spreads(Spread) can widen significantly during major news events (e.g., NFP), causing spreads(Spread) to jump from 2 pips to 20 pips instantly
• Not suitable for beginner traders

Which spread(Spread) is better?

There’s no single answer; it depends on your trading style:

Retail traders (small-scale): prefer fixed spreads(Spread) for certainty in costs

Professional traders (high-frequency): choose variable spreads(Spread) for lower costs during high volatility

Those avoiding requotes: opt for variable spreads(Spread) because there are no requotes

Tips for reducing spread(Spread) costs

Remember the basic rule: the more the spread(Spread) fluctuates, the harder it is to profit

Steps to follow:

1. Choose a broker with low fluctuation in spreads(Spread)
2. Trade major currency pairs like EUR/USD, GBP/USD, which have high liquidity and low spreads(Spread)
3. Avoid pairs with wide spreads(Spread), such as exotic or less popular pairs(

Summary: Spread)Spread( is the difference between the bid price )Bid( and the ask price )Ask(. Deep understanding of spreads)Spread( helps you plan strategies wisely because Forex trading is a financial activity requiring knowledge and planning, not gambling. Those with thorough understanding have a higher chance of success.