Spread
In the most simple terms, spread is defined as the difference between the bid price and the ask price. This is how brokers make their profit. A good broker is one that gives low spreads. Wide spread means high ask price and low bid price. This results in paying more when you buy and getting less when you sell. Hence, its difficult to make a profit.
Let's have a look at the example given below:
EUR/USD = 1.2500/03
The value of currency pairs is specified in two numbers separated by slash. The above example means the currency pair rate is EUR/USD = sell/buy. The sell value is 1.2500 and the buy price is at a difference of 3 pips. Hence, the buy value is 1.2503. And spread is the difference between the bid price and the ask price, hence spread in this case will be 3 pips.
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