Bid, Ask and Spread in Forex: What They Mean and What They Cost
Bid, ask and spread in forex explained: why you buy at the ask and sell at the bid, how to work out spread cost in money, and why spreads widen.
You open a trade, the market has not moved, and your platform already shows a small loss. Nothing is broken. You have just met the bid, the ask and the spread, the three numbers behind every price in forex.
Quick answer: In forex, the bid is the price you can sell at and the ask is the price you can buy at. The spread is the gap between them, measured in pips, and you pay it on every trade. In money, it is spread pips × pip value × lots. Spreads widen when liquidity is thin.
What are the bid, ask and spread in forex?
Every forex quote is really two prices, not one. When your platform shows EUR/USD at 1.08500 / 1.08512, it is telling you two different things:
- The bid is the price at which the market will buy from you. If you sell, you sell at the bid.
- The ask, sometimes called the offer, is the price at which the market will sell to you. If you buy, you buy at the ask.
The ask is always higher than the bid. The difference between them is the spread. In this quote it is 1.08512 − 1.08500 = 0.00012, which is 1.2 pips. A pip is the fourth decimal place on most pairs, and the fifth decimal is a pipette, one tenth of a pip. So 0.00012 is 12 pipettes, or 1.2 pips. On yen pairs the pip is the second decimal instead.
Tap through the parts of a quote below. The component uses a four-decimal quote, 1.0850 / 1.0852, which has a 2-pip spread; the mechanics are identical.
The spread is the gap between bid and ask: 2 pips here. It is the cost of opening a trade, paid the moment you enter.
A forex quote has two prices. You sell at the bid on the left and buy at the ask on the right; the gap between them is the spread, the cost of trading that pair at that moment.
There are two prices because someone has to stand ready to trade with you in either direction, and they want to be paid for it. Banks that make prices quote a price they will buy at and a slightly higher price they will sell at. Your broker passes those prices on, usually with a margin added, or sets its own. Either way, the spread is the main way most brokers earn their money on a standard account. The full chain from your click to the market is covered in how forex trading works.
It helps to picture the two prices as rungs on a ladder with a gap between them. Buyers step in at the top of the gap; sellers step out at the bottom. Nobody trades inside it.
The spread never appears as a separate charge on a statement; it is built into the prices you trade at, which is why it is easy to overlook. And because it is quoted in pips, the same unit as your stop and target, you can compare it with them directly. If pips are still unfamiliar, read what a pip is in forex first.
Bid price and ask price: why a new trade starts negative
When you buy, you pay the ask. But an open buy position is valued at the price you could close it at, and you close a buy by selling, at the bid. So the moment your buy order fills, your platform values it at the lower price. You are down by exactly the spread.
Take the quote above. You buy EUR/USD at the ask, 1.08512. The bid is 1.08500. If you closed immediately, you would sell at 1.08500 and lose 1.2 pips. On 0.3 lots, where each pip is worth $3, that is −$3.60 before the market has moved at all.
Selling works the same way in reverse. You open a short at the bid, 1.08500, and you close it by buying back at the ask, 1.08512. Again you start 1.2 pips behind. Whether you buy or sell, the spread is paid in full on every round trip.
This is why traders describe the spread as a hurdle. Before a trade can make anything, the price has to travel the width of the spread in your favour. On a 1.2-pip spread that is a small hurdle for a trade aiming for 50 pips, and a large one for a trade aiming for 5. We come back to that point below.
It is also why the advertised spread matters less than the spread at the moment you click. The bid–ask spread lesson in Forex Foundations walks through the same mechanics with a quiz to check you have them.
Which price does your chart show?
This is where the two prices start to affect your stops, not only your costs. On most retail platforms, the candles and the price line are drawn from the bid. The ask is there, one spread higher, but you only see it if you switch on an ask line in the chart settings. Some charting packages draw the mid price instead, so check what yours uses.
Different orders are triggered by different prices:
| Order | Closes or opens by | Triggered by |
|---|---|---|
| Buy at market, buy limit, buy stop | Buying | The ask |
| Sell at market, sell limit, sell stop | Selling | The bid |
| Stop loss or take profit on a long (buy) trade | Selling | The bid |
| Stop loss or take profit on a short (sell) trade | Buying | The ask |
For a long trade, nothing surprising happens: you close by selling, your stop is triggered by the bid, and the bid is what the chart shows. If the chart touches your stop, you are out; if it does not, you are not.
For a short trade, the picture changes. You close by buying, so your stop loss is triggered when the ask reaches it. The ask sits above the line on your chart by the width of the spread. When the spread is normal, that is a pip or so. When the spread suddenly widens, the ask can jump to your stop while the bid, and therefore your chart, stays well below it. You look at the chart afterwards and the price never touched your level. It did; it was just the price you cannot see.
The same thing applies to entry orders. A buy stop placed just above a level, to catch a breakout, is triggered when the ask gets there. Because the ask is above the chart line, the order can fill while the candles still sit a pip or so below your level. A buy limit placed at support needs the ask, not the bid, to fall to your price, so the chart can touch your level without the order filling. Sell orders behave as the chart suggests, because they are triggered by the bid. Tap through the order types below to see where each one sits relative to the current price.
Fills immediately at the current ask (buying) or bid (selling). You get speed; you accept whatever the price is right now.
Market, limit and stop orders placed around a current price of 1.0850. Remember the trigger: buy orders fill when the ask reaches them, sell orders when the bid does.
None of this means the platform is cheating you. It means placing orders with the spread in mind: for shorts, add the typical spread, and more for quiet hours, to the buffer above your stop. Our guide on where to place a stop loss and the lesson on order types both cover this in more depth.
How to calculate the spread cost in money
Spread in pips tells you the hurdle. Spread in money tells you the bill. The formula is the same for every pair:
Spread cost = spread in pips × pip value per lot × number of lots
For any pair quoted in US dollars, such as EUR/USD or GBP/USD, one pip on one standard lot (100,000 units) is worth $10. On a mini lot (0.1) it is $1, and on a micro lot (0.01) it is 10 cents. For other pairs, the pip value depends on the exchange rate, as the table shows.
| Pair | Pip value per standard lot (USD account) | Example spread | Spread cost on 0.3 lots |
|---|---|---|---|
| EUR/USD | $10 | 1.2 pips | 1.2 × $10 × 0.3 = $3.60 |
| GBP/USD | $10 | 1.5 pips | 1.5 × $10 × 0.3 = $4.50 |
| USD/JPY at 150 | about $6.67 | 1.2 pips | about $2.40 |
| EUR/GBP, GBP/USD at 1.27 | about $12.70 | 1.5 pips | about $5.72 |
Example spreads for illustration, not quotes from any broker. The pip values come from the standard formula: for USD/JPY, one pip on a lot is ¥1,000, which at 150 yen to the dollar is about $6.67; for EUR/GBP it is £10, which at 1.27 dollars to the pound is about $12.70. The lesson on pips and lots shows the working for any pair, and our guide to lot sizes in forex covers the units.
A few dollars sounds like nothing, but the spread is paid on every trade, winners and losers alike. Use the calculator to see a week and a year of spread costs at your own pace.
Spread cost = spread in pips × pip value for your trade size. It is paid on every trade, whether it wins or loses.
Ten mini-lot trades a week at 1.2 pips costs $12 a week and $576 over a 48-week year. Trade 0.3 lots instead and every figure triples: $3.60 a trade, $36 a week, $1,728 a year. That is before any commission or overnight swap, which are separate costs covered in our full guide to forex trading costs. If your account trades on a raw-spread basis with a commission per lot, add the two together to compare like with like.
Why spreads widen: liquidity, sessions, news and rollover
The spread is not a fixed property of a pair. On most accounts it changes from second to second, and it changes most at predictable times. The underlying reason is always the same: liquidity, meaning how many participants are ready to buy and sell, and in what size. When many banks are quoting, competition squeezes the gap between bid and ask. When few are quoting, the gap opens up.
Sessions and time of day
Forex runs around the clock, but activity does not. It rises when a major financial centre opens, falls when one closes, and peaks when two big centres overlap. The London session and the London–New York overlap are usually the busiest hours of the day, and that is when the major pairs tend to have their tightest spreads. The clock below shows which sessions are open now, in your own time zone.
Open now: …
The four main forex sessions in your local time. Spreads on the major pairs are usually tightest when London is open, and especially during the London–New York overlap.
News releases
Around major economic releases, such as US jobs data or a central bank rate decision, the banks that supply prices pull back for a few seconds or minutes because they do not want to be caught on the wrong side of a sudden move. Fewer quotes means a wider spread, sometimes several times its usual size, along with a higher risk of slippage. The spread usually settles once prices have adjusted to the news.
The daily rollover
Every weekday at 5 p.m. New York time (10 p.m. in the UK for most of the year), the market rolls over to the next trading day. It is one of the quietest moments in the cycle: New York is winding down and the Asian centres have not yet got going. Spreads on many pairs widen sharply for a few minutes either side. The Sunday open and bank holidays behave similarly.
Majors, minors and exotics
The pair itself matters as much as the hour. The US dollar is on one side of close to nine in ten of all currency trades, according to the Bank for International Settlements’ Triennial Survey, and EUR/USD is the most traded pair of all. The major pairs, each with the dollar on one side, attract the most banks and the most volume, so they usually have the tightest spreads. Minor pairs (crosses such as EUR/GBP or AUD/JPY) are typically a little wider. Exotic pairs, which pair a major currency with that of a smaller or emerging economy, can have spreads many times wider than a major, and they widen further outside their home market’s hours.
Look at the live spread before you click. If it is three times its usual width, you are paying three times the usual price for the same trade. Our guide to forex market hours and the lesson on market sessions explain why the quiet hours are the expensive ones.
Fixed vs variable spreads
Brokers price spreads in one of two ways, and the choice changes how predictable your costs are.
A variable spread, also called floating, moves with the market. It is tightest when liquidity is deep and widens when it is thin, exactly as described above. Brokers that pass orders on to outside liquidity providers usually quote variable spreads, because they are passing on the prices they receive.
A fixed spread stays the same in normal conditions, whatever the hour. It is usually offered by brokers that act as market makers, filling your orders from their own book. A fixed spread is normally wider than a good variable spread at its best, because the broker is averaging the busy hours with the quiet ones. And fixed rarely means fixed in every circumstance. Read the terms: in fast markets, many firms reserve the right to widen the spread, or to reject your price and offer a new one, known as a requote.
| Variable spread | Fixed spread | |
|---|---|---|
| In busy hours | Usually tighter | Usually wider |
| In quiet hours and at rollover | Can widen sharply | Usually unchanged |
| Around big news | Widens, sometimes a lot | May widen or requote, depending on the terms |
| Predictability | Lower | Higher in normal conditions |
| Typical broker model | Orders passed to liquidity providers | Market maker |
Neither is better in general. If you trade the majors in London and New York hours, a variable spread will usually cost less; if you value knowing the cost in advance, a fixed spread may suit you. The difference between the two broker models is explained in ECN vs market maker brokers, and the lesson on trading costs shows how to compare accounts on total cost rather than headline spread.
Why the spread matters more on small stops and targets
A 1.2-pip spread is the same 1.2 pips whatever your plan. What changes is how much of your plan it uses up. On a trade with a 50-pip stop, it is a rounding error. On a trade with a 5-pip stop, it is a large slice of the risk you are taking.
There are two ways to see this. The first is as a share of the stop. With a 1.2-pip spread, a 5-pip stop gives up 24% of its distance to the spread; a 10-pip stop, 12%; a 20-pip stop, 6%; a 50-pip stop, 2.4%.
The second is as a change in the room your trade really has. Say you buy at the ask, 1.08512, with a 10-pip stop at 1.08412 and a 10-pip target at 1.08612. Both look symmetrical on paper. But the bid, which triggers both, starts at 1.08500. It only has to fall 8.8 pips to hit your stop, and it has to rise 11.2 pips to reach your target. The spread has quietly turned an even bet on distance into an uneven one. With a 50-pip stop and target, the same spread shifts the distances to 48.8 and 51.2 pips, a much smaller distortion.
This is why very short-term strategies are so sensitive to spreads, and why a method that works on one pair can fail on another with a wider spread. Whatever your timeframe, include the spread when you work out your risk-reward ratio, and size positions from the full stop distance, as the lesson on stop-loss placement explains.
Common mistakes with the bid, ask and spread
Judging a broker by its “from 0.0 pips” headline
The lowest spread a broker advertises is usually the best moment on the most liquid pair, often on an account that charges a commission. What matters is the typical spread on the pairs you trade, at the hours you trade them, plus any commission. Check that on a demo before you commit, and read our guide on how to choose a forex broker for the safety checks that come first.
Forgetting that shorts close at the ask
A tight stop above a high on a short trade can be triggered by a widening spread while your bid chart never touches it. Add the typical spread, and more for quiet hours, to the buffer above every short stop. If your platform allows it, switch on the ask line so you can see both prices.
Holding tight positions through the rollover
The minutes around 5 p.m. New York time are among the thinnest of the day, and stops a pip or two from the price can be hit by the spread alone. Give stops more room overnight, or avoid leaving tight stops exposed at that hour.
Ignoring the spread when the stop or target is small
A 5-pip stop and a 1.2-pip spread means almost a quarter of your risk is spent on entry. If your method relies on small moves, test it with realistic spreads, including the wider ones at quiet hours, before trading it with real money.
Frequently asked questions
What is the bid and ask price in forex?
The bid is the price at which you can sell a currency pair, and the ask is the price at which you can buy it. The ask is always a little higher. On a quote of 1.08500 / 1.08512, you sell at 1.08500 and buy at 1.08512, and the 1.2-pip gap between them is the spread.
Why does my trade show a loss as soon as I open it?
Because an open position is valued at the price you could close it at. A buy is opened at the ask but closed at the lower bid, so it starts behind by exactly the spread. A short is opened at the bid and closed at the higher ask, with the same effect. The price must move the width of the spread before you break even.
How do I calculate the spread cost in forex?
Multiply the spread in pips by the pip value per lot and by the number of lots. On EUR/USD, one pip on a standard lot is worth $10, so a 1.2-pip spread on 0.3 lots costs 1.2 × $10 × 0.3 = $3.60. The cost is paid on every trade, win or lose.
What is a good spread in forex?
It depends on the pair and the time. On the most liquid major pairs during London and New York hours, spreads are often around a pip or less on a standard account. Exotic pairs can be many times wider. A good spread is one that is small relative to your stop and target, at the hours you actually trade.
Why did my stop loss trigger when the chart never reached it?
Most charts show the bid, but a short trade's stop is triggered by the ask, which sits one spread higher. If the spread widens, for example at the daily rollover or around news, the ask can reach your stop while the bid on the chart stays below it. Add a spread buffer to short stops.
Why do forex spreads widen at night?
Spreads depend on liquidity. Late in the New York session and around the 5 p.m. New York rollover, the major centres are closed or closing, fewer banks are quoting, and the gap between bid and ask opens up. Spreads usually tighten again as Asian and then London trading picks up.
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