If you don’t know about spread, you will lose heavily!3mins to know critical skills in forex trading

The price difference between buying and selling is called the spread, also known as the “bid/ask spread”. The spread is another way to make money, usually for the brokers who charge “no commission”. Instead of charging a separate fee for making a trade, the cost is built into the buy and sell price of the currency pair you want to trade. As profit-seeking financial institutions. The brokers provide services and have to make money somehow.

In other words, they make money by selling the currency to you for more than they paid to buy it. And they also make money by buying the currency from you for less than they will receive when they sell it. This difference is called the spread.

For example: If you want to sell your old phone to a second-hand store, in order to make a profit, the shop owner needs to buy your iPhone at a price lower than the price he‘ll sell it for. If the phone can be sold for 300 dollars, the owner can buy it from you for 299 dollars at most in order to make money. That difference of 1 dollar is the spread. Therefore, if you meet a broker that claims “zero commissions” or “no commission”, it means there is no separate commission fee to pay but you still need to pay a commission. It’s just built into the bid/ask spread!

How is the Spread in Forex Trading Measured？

Pips are used to measure the spread, and a pip is the smallest unit of the price movement of a currency pair. One pip is equal to 0.0001. An example is that if you buy a currency pair EUR/USD which is 1.1038/1.1040, you need to paid 2 pips of spread. You need to pay 20 dollars to the broker. It is worth noting that Japanese yen's spread is only quoted to 2 decimal places, for example, if price of the currency pair USD/JPY is at 100.00/100.04, the spread is 4 pips.

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