Forex Spreads
What are Forex Spreads?
Although a spread can have several meanings in the field of finance, they all refer to the difference between the buy price and the sell price of an instrument. It is important to state that the former will always be higher than the latter, while the underlying market price will be in the middle of these two prices.
- While trading, you will either buy or sell the particular instrument you are trading, based on the assumption that the specific market price will rise or fall.
- Once a trade is placed and the price’s movement goes beyond the spread’s cost, the trade will be successful.
- Similarly, when the price remains between the spread range or outside of it, the trade will not be successful. In CFD trading, the spread is one of the key costs involved.
- The narrower the spread is the better value you will receive as a trader. Remember that there are risks to consider as well.
- For instance, some markets charge a commission or provide a combination of spread and commission. The spread is the last large number within a price rate.
