Learn how Forex & CFD spreads impact your trading costs and take advantage of our competitive pricing on popular currency pairs and other instruments.
Learn how Forex & CFD spreads impact your trading costs and take advantage of our competitive pricing on popular currency pairs and other instruments.
Getting access to trading in the forex market incurs some costs. One of these costs is the bid/ask spread, which is the difference between the ask and bid prices. A large spread increases the cost of trading a specific financial instrument, such as a currency pair. In contrast, a low spread reduces trading costs.
A trader should calculate the impact of spreads on their trading costs and adjust their plans accordingly. FP Markets offers tight spreads on a wide array of popular financial instruments, starting as low as 0.0 pips.
Traders should closely monitor changes in spreads for their preferred financial instruments. Specific groups of traders, such as scalpers and day traders, base their decisions on even the most minor spread changes.
Low liquidity or periods of increased market volatility can cause the difference between bid and ask prices to rise to higher-than-usual levels. A prime example of financial instruments with high spreads due to low liquidity are minor and exotic currency pairs, which are not widely traded in markets.
Low liquidity or periods of increased market volatility can cause the difference between bid and ask prices to rise to higher-than-usual levels. A prime example of financial instruments with high spreads due to low liquidity are minor and exotic currency pairs, which are not widely traded in markets.
| Instrument | Standard Account | Raw Account | ||
|---|---|---|---|---|
| Account CCY | Per Side | Round Trip | ||
| Forex & Metals | Zero (Built into the spread) | AUD/CAD/SGD | $3.5 | $7 |
| USD | $3 | $6 | ||
| EUR | €2.75 | €5.5 | ||
| GBP | £2.25 | £4.5 | ||
| HKD | $20 | $40 | ||
| JPY | ¥250 | ¥500 | ||
| Commodities | Zero (Built into the spread) | Zero (Built into the spread) | ||
| Indices | Zero (Built into the spread) | Zero (Built into the spread) | ||
| Shares | Zero (Built into the spread) | Zero (Built into the spread) | ||
| Cryptocurrencies | Zero (Built into the spread) | Zero (Built into the spread) | ||
FP Markets provides an array of fixed and variable spreads for fast trade execution. Partnering with market-leading financial institutions, FP Markets traders benefit from deep liquidity pools and real-time price quotes for various popular financial instruments. Open a Standard or a Raw trading account and build your trading plan, taking advantage of spreads as low as 0.0 pips.
Spread in Forex is the difference between the bid price and ask price. The spread cost is measured in ‘pips’ or ‘points’ and is the primary cost of trading. A currency pair’s spread can be influenced by a number of factors, including volatility and liquidity.
Spread in Forex is calculated by taking the difference between the current bid and ask prices of a currency pair.
Spread = Ask Price − Bid Price
For instance, the EUR/AUD currency pair is quoted as AU$1.6162/AU$1.6163. Simply subtract the ask price (AU$1.6163) from the bid price ($AU1.6162) to determine the spread: 0.0001.
Knowing the forex spread of a specific currency pair provides traders with insights into the market’s volatility and liquidity. As a result, forex spreads can serve as indicators of overall market conditions.
Short-term trading strategies such as scalping and day trading are more likely to be affected by widening spreads. Wider spreads lead to increased trading costs, reducing the potential for profitable trades.
Long-term trading strategies, like swing or position trading, are less likely to be impacted by wider spreads.
A high (wide) spread is defined as a wide bid/ask spread. For example, imagine a usual spread of 1 pip compared with a spread of 7 pips for the same trading instrument. So, in this example, the instrument may have a bid rate of US$1.0050 and an ask rate of US$1.0057, revealing a wide spread. A low spread in this example, therefore, could be reflected using the same bid rate of US$1.0050, though with a smaller ask rate of US$1.0051 (this is a 1-pip spread).