Spread

Definition. The difference between the bid and ask price of an instrument; the built-in cost of entering a trade at market.

The spread is the difference between the bid (the price you sell at) and the ask (the price you buy at). It is the built-in cost of trading at market, paid on every position you open.

In forex it is measured in pips. EURUSD often trades with a spread under one pip during liquid hours, widening sharply around news releases and the daily rollover. The cash cost is spread × pip value × lots: a 0.8-pip spread on one standard lot costs about $8.

Every trade therefore starts slightly behind. The more often you trade and the smaller your target, the larger the spread looms: for a scalper aiming at 5 pips, a 1-pip spread gives up 20% of the move before price does anything. Slippage adds a second, variable cost on top.

In a prop-firm challenge

Spread cost competes directly with the profit target. Fifteen one-lot trades a day at a 0.8-pip spread is roughly $120 of drag; on a $10,000 evaluation with an 8% ($800) phase target, two days of that churn consumes the equivalent of 30% of the target. Frequent, unplanned entries are a form of overtrading, and transaction costs are one of the quieter reasons they sink evaluations. Checking typical spreads on the instruments you plan to trade — and avoiding the hours when they widen — is part of preparing an attempt.

Related terms

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