The Spread Explained
The spread is the gap between the bid and ask — the price you buy at versus the price you sell at. It is the built-in cost you pay on every single trade.
Bid, ask and the spread
The bid is what buyers will pay; the ask (or offer) is what sellers want. You buy at the ask and sell at the bid, so the moment you enter you are down by the spread — it is the broker/market-maker's cut. A 1-pip spread means price must move 1 pip in your favour just to break even.
Spreads are tightest on liquid pairs during active sessions and widen on thin instruments, off-hours, and around news. A strategy with a small edge can be eaten alive by spread if it trades frequently on wide-spread instruments.
Spread, slippage and costs
Beyond the spread, fast markets add slippage — getting filled worse than the quoted price. Both are why frequent, small-target strategies (scalping) are so sensitive to execution costs, while wider-target swing trades feel it less.
Factor the spread into your reward-to-risk and avoid entering right into a low-liquidity session or a news release when spreads balloon. Real expectancy is always calculated net of costs.
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Play Chart Bound free → Try today's Call the Candle →Frequently asked questions
What is the bid-ask spread?
The difference between the bid (what buyers pay) and the ask (what sellers want). You buy at the ask and sell at the bid, so the spread is the cost you pay to enter and exit.
Why do spreads widen?
Spreads widen when liquidity drops — on thin instruments, during off-hours, and around high-impact news — because there are fewer orders to match, so market makers charge more.
Does the spread matter for my strategy?
Yes. The more frequently you trade and the smaller your targets, the more the spread eats your edge. It must be included when you calculate real, net-of-cost expectancy.