Why Spreads Widen at News (And How to Avoid Getting Hurt)

Spreads in forex are usually tight — 0.5 pips on EUR/USD during normal hours, sometimes 0.0 on ECN brokers. But during major news releases, those same spreads can explode to 5-10 pips in seconds, sometimes even higher on volatile pairs. This isn't a glitch and it isn't your broker scamming you — it's a fundamental mechanic of how price discovery works under uncertainty. Understanding it explains a lot of mysterious losses and helps you avoid trading at exactly the wrong moments. Here's the mechanism. The spread is the gap between the highest price someone is willing to BUY at (the bid) and the lowest price someone is willing to SELL at (the ask). Market makers and liquidity providers quote both sides of this spread in normal conditions, and they make money on the gap. They do this because they're confident they can predict price reasonably well in the next few seconds — meaning they can offload positions they accumulate without taking big losses themselves. Now imagine a major news release is about to drop. Say NFP at 8:30am ET. Everyone in the market knows the print is coming, and everyone knows it can produce a 50-100+ pip move in either direction. Liquidity providers face a problem: if they keep quoting tight spreads through the release, they'll be filling orders at prices that may be wildly off the new market in 2 seconds. They could lose huge amounts of money in a single tick. So what do they do? They WIDEN their spreads dramatically — sometimes pulling their quotes entirely — to protect themselves from being adverse-selected during the volatility window. Tight 0.5 pip spreads become 5-10 pips. ECN brokers with raw spreads from multiple LPs see all of them widen simultaneously. Which events cause it. The big ones: FOMC rate decisions, NFP, US CPI, ECB rate decisions, BoE rate decisions, BoJ interventions, China NBS data, major geopolitical events, and central bank press conferences. The wider the potential move, the wider the spreads get. Spreads also widen at session opens (Sunday open especially), during thin Asian session hours on European pairs, and during holiday liquidity gaps. Less commonly known: spreads on exotic pairs can be wide ALL the time, not just during news. How to avoid getting hurt. First, know when major news is releasing — check the economic calendar every morning. Second, don't open new positions in the 30 minutes before high-impact news. Third, close existing positions or use guaranteed stops to protect against widened spreads triggering your stops at bad prices. Fourth, never use market orders during news — even if direction is right, the spread will eat your profit. Fifth, wait 5-15 minutes after the release for spreads to normalize before re-entering. The Candleread desk's hard rule: no normal trading during the 30-minute window around any high-impact release. Wait it out and trade the post-release move on the pullback instead.