Spread
Also known as: bid-ask spread
What is it?
The spread is the gap between the two prices a broker quotes you at any moment: the bid, which is the price you can sell at, and the ask, which is the price you can buy at. The ask is always a little higher than the bid, and that small difference is the spread. It is effectively the cost of doing business, paid the instant you enter a trade, before the market has moved at all. Here is the everyday picture: if EUR/USD shows a bid of 1.0849 and an ask of 1.0850, the spread is one pip.
The moment you buy at 1.0850, you could only sell back at 1.0849, so your new position starts one pip underwater. To break even, the price has to move in your favour by at least the spread. Spreads vary by instrument, by broker, and by time of day. Major pairs in busy hours have tight spreads; exotic pairs or quiet overnight hours have wide ones.
This matters most for traders who aim for small gains, such as scalpers and high-frequency bots, because they pay the spread on every single entry and exit. A strategy that targets two pips of profit can be wiped out by a one-and-a-half-pip spread. For swing traders chasing hundreds of pips, the same spread barely registers. Knowing your typical spread tells you the true cost of each trade.
Why it matters: Spread is a per-trade cost that hits scalpers and high-frequency automation hardest, since it is paid on every entry and exit.
Spread = ask price - bid price
Spread is a guaranteed cost on every trade and is decisive for short-target strategies.
Real-world example
A 1.2-pip spread on EUR/USD means a new long is 1.2 pips underwater the instant it opens.
How SignalBots handles it
SignalBots' execution filters can skip signals when the spread is too wide, protecting short-target trades from cost blowouts.
Pro tip
For scalping strategies, factor the typical spread into the edge - a setup that nets two pips dies on a 1.5-pip spread.
Common pitfalls
Backtesting on raw price with no spread, so a strategy that looks profitable loses to costs live.
Frequently asked questions
Why is my position already losing the second I open it?
You buy at the ask and can only sell back at the lower bid, so you start down by the spread. The price has to move in your favour by at least the spread before you break even. This is normal and applies to every trade.
Why does the spread get wider sometimes?
Spreads widen when fewer participants are trading or when uncertainty spikes, such as overnight, on exotic instruments, or around major news. Tighter spreads appear during busy, liquid sessions like the London and New York overlap.
Does the spread matter for swing trading?
Far less than for scalping. A one-pip spread is trivial on a 200-pip target but ruinous on a three-pip one. The smaller your profit target, the more the spread eats into it.
Is a wider spread always a bad broker?
Not necessarily. Some accounts quote a wider all-in spread with no separate commission, while others show a raw tight spread plus a commission. Compare the total cost per trade, not the headline spread alone.
How do I account for the spread in a strategy?
Build the typical spread into your expected edge. If a setup nets two pips on average but the spread is one and a half, the real edge is half a pip, which may not survive other costs. Test on prices that include the spread, not raw mid-prices.