Understanding Spreads

A spread is the difference between the bid and ask prices of any particular currency pair. Learn more about spreads to maximize your trading accuracy.

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When executing a trade with a broker, you are essentially betting on the market to either move up or down. If the price moves in your favoured direction beyond the range of the spread, your trade will be considered profitable. Alternatively, if the price remains within the range of the spread or moves against you outside of the spread, you will have a losing position.

The spread is one of the main costs generally incurred through trading CFDs. The smaller the spread, the better pricing you will receive, which increases your profit margins as a trader. You should also be aware of other potential costs as a trader. For example, some CFD markets will have a commission charge or potentially a mix of spread and commission fees.

It is important to note that the size of the spread can be influenced by different factors including volatility in the market, the currency pair you are trading, and the size of your investment. A lower spread usually indicates high liquidity in the market and low volatility whereas a wider spread usually means there is high volatility in the market with low liquidity.