Spread

The spread is the gap between the best available buy price (ask) and the best available sell price (bid) at any given moment. It represents a cost to the trader on every trade.

How Spreads Work

If EUR/USD is quoted at:

• Bid: 1.0850
• Ask: 1.0852
• Spread: 2 pips

If you buy at 1.0852 and immediately sell, you'd sell at 1.0850 — an instant 2-pip loss. The price must move 2 pips in your favor just to break even.

Types of Spreads

Fixed Spread

Stays the same regardless of market conditions. More predictable but usually wider.

Variable (Floating) Spread

Changes based on supply and demand. Tighter during liquid hours, wider during news or low-volume periods.

Typical Spreads

| Instrument | Normal Spread | During News |

|-----------|--------------|-------------|

| EUR/USD | 0.5–2 pips | 3–10 pips |

| ES futures | 0.25 (1 tick) | 1–4 ticks |

| Gold (XAU/USD) | 10–30 cents | 50–200 cents |

| Bitcoin | $5–$50 | $100–$500 |

Impact on Prop Trading

• Tighter spreads = lower costs: Trade during peak liquidity hours
• Wide spreads = hidden danger: A 5-pip spread on news effectively reduces your daily loss allowance
• Commission vs spread: Futures have tight spreads + commission; forex often has wider spreads and no commission (ECN accounts are the exception)

Tips

• Always trade during active market hours for tighter spreads
• Factor spread cost into your risk-reward calculations
• Compare spread conditions across firms — they can differ significantly