What is the spread and why is it important?

The spread is the fee charged by the middleman for trading services rendered. It refers to the difference between the asking price and the bidding price. One has to be mindful of this amount when trading.

A typical Forex trade would go as follows: Finding someone who will pay your price if you want to sell and vice versa. The party who is facilitating the trade, runs the risk of getting a better off after the initial order was filled and losing out. In order to reduce this risk, the market always retains a bit of every trade. This is called the spread.

spread

Whilst a spread of 0.0004 British Pound may not sound like a lot, it can add up quickly in case of a large trade or a small spread. Be sure to take into consideration what impact the spread will have on your trade as well as your profits.

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