The bid-ask spread
Explain why brokers show two prices and what the gap costs you.
Lesson path
Market Foundations + Forex Mechanics
The Basics
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Explain why brokers show two prices and what the gap costs you.
Two prices, one cost
Every tradable quote has two prices. The bid is the price someone is willing to buy from you. The ask is the price someone is willing to sell to you. If you buy, you pay the ask. If you sell, you receive the bid. The difference between those two prices is the spread.
On EUR/USD, a tight ECN-style spread might be around 0.5 pips in calm liquid conditions. A market maker quote might be 1 to 2 pips. During major news, spreads can widen to 5 pips or more. The exact number depends on the broker, account type, time of day, and market conditions.
For a $500 account, spread matters because small costs add up fast. If your target is 10 pips and the spread is 2 pips, a meaningful chunk of the trade has already gone to transaction cost. Tighter spread means cheaper trading. Wider spread means your trade starts in a deeper hole.
Recap: bid is where you can sell, ask is where you can buy, and the spread is the gap you pay to enter the market.
Knowledge check
Answer before moving on.
1. If you place a buy order, which side of the quote do you pay?
2. What is the spread?
3. Why is 'spread does not matter if you hold long enough' a bad rule?
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