Archive · 7 Oct 2026
Forex Spreads Explained: Why Trades Start in the Red
When you trade currencies, you see two prices: one to buy and one to sell.
The buying price is usually a little higher than the selling price.
The gap between them is called the spread, and it is one of the costs of trading.
That is why a new trade can show a small loss right away.
The market price must move enough to cover the gap before the trade breaks even.
Spreads can get bigger when fewer people are trading or important news is happening.
A fixed spread is steadier, while a variable spread can change.
Traders can compare costs and avoid times when spreads are unusually wide.
The spread is the difference between a currency pair’s ask price and bid price, and it is a basic trading cost.
A buy trade initially shows a loss because it is opened at the higher ask price and valued at the lower bid price.
Spreads are commonly measured in pips and can widen during thin markets, major news, or less-traded currency pairs.
Fixed spreads are more predictable, while variable spreads may be lower in active, calm markets but widen during volatility.
Traders can reduce spread costs by focusing on liquid major pairs, considering market timing, and comparing spreads with commissions and overnight fees.
- Who
- Forex traders, especially beginners, and brokers that facilitate currency trading.
- What
- An explainer describes forex spreads, why trades can start at a loss, and how spreads affect trading costs.
- When
- No publication date is stated; the article discusses spreads across different market conditions and trading hours.
- Where
- In the forex market.
- Why
- To explain the cost created by the gap between buying and selling prices and how traders can account for it.
- Spread
- The difference between a currency pair’s ask price and bid price.
- Common measurement
- Pips.
- GBP/USD example
- A quote of 1.2700 / 1.2703 represents a 3-pip spread.
- USD/JPY example
- A quote of 150.10 / 150.12 represents a 2-pip spread.
- Conditions that can widen spreads
- Thin markets, major news, Monday market openings, and the end of the trading day.
- Potentially tighter conditions
- Active trading hours, when London and New York are both open for major pairs.
- Zero-spread accounts
- They may charge a commission instead; the article advises comparing spreads, commissions, and overnight fees.