Educational content. This article defines what the spread is and how it works across CFD instruments. It does not constitute investment advice or a trading recommendation. CFD trading carries significant risk of loss and may not be suitable for all investors.
The spread in trading is the difference between the bid (sell) price and the ask (buy) price of an instrument: spread = ask - bid. It is the built-in transaction cost of every position, since you open at the ask and close at the bid. Every quote you see on a trading platform shows two prices, and the gap between them is what the spread measures.
The spread defines the cost of entry on forex, metals, indices, and oil. The definition is constant across asset classes, but how it is measured (pips, dollars, or points) and how wide it gets (fixed or variable) changes from one instrument and market condition to the next.
What Is the Spread in Trading?
The spread is the difference between the bid and ask price of an instrument, calculated as ask minus bid. It represents the built-in transaction cost charged on every CFD position, because a position opens at the higher ask price and closes at the lower bid price. The spread is quoted in pips on forex, in price units on metals, and in points on indices, but the underlying concept is identical: the gap between the two prices a broker shows at the same moment.
Because the spread is embedded in the prices themselves, it applies whether the position is long or short. There is no separate line item for it on a spread-only account; the cost is simply the distance between the two prices at the moment of execution.
Bid vs Ask: The Two Prices Behind Every Quote
The bid is the price at which you can sell an instrument and the ask is the price at which you can buy it, and the ask is always higher than the bid. The bid is the lower of the two prices; the ask (sometimes called the offer) is the higher. The difference between them is the spread.
A simple way to keep the two straight: the prices are quoted from the perspective of the market maker, not the trader. The market maker bids (offers to buy) at the lower price and asks (offers to sell) at the higher price. You, as the trader, do the opposite: you buy at the ask and sell at the bid.
Worked example on EUR/USD. Suppose the platform shows 1.16547 / 1.16644. The bid is 1.16547 (where you sell), the ask is 1.16644 (where you buy), and the spread is 1.16644 - 1.16547 = 0.00097. Because each pip on EUR/USD is 0.0001, that spread equals 9.7 pips. For the full definition of how pips are counted on each instrument, see what is a pip in trading.
Why the Spread Is the Real Cost of Entry (You Buy at the Ask, Sell at the Bid)
The spread is the cost of entry because a position opens at the ask and closes at the bid, so it begins with an unrealised loss equal to the spread. The moment a buy position is opened, it is marked against the bid (the price at which it could be closed), which sits below the ask it was opened at. That gap is the spread, and it is why a freshly opened trade shows a small loss before the market has moved at all.
For the position to break even, the market price must move in the trader's favour by at least the full spread. For the position to show a profit, it must move beyond the spread. This applies symmetrically to short positions: a sell opens at the bid and closes at the ask, so the same spread distance must be recovered.
The practical consequence is that the spread is a per-trade cost that is independent of holding time. It is incurred once on entry (built into the open and close prices), unlike swap, which accrues for each night a position is held open. For how overnight financing works alongside the spread, see what is swap in trading.
How the Spread Is Measured: Pips on Forex, Dollars on Gold, Points on Indices
The spread is measured in the smallest standard unit of each instrument: pips on forex pairs, price units (dollars) on metals, and index points on equity indices. The number looks different across asset classes even when the monetary cost is similar, so the unit always has to be read alongside the instrument.
- Forex. The spread is counted in pips, where one pip is 0.0001 on most majors (the fourth decimal) and 0.01 on Japanese yen pairs (the second decimal). For example, a EUR/USD quote of 1.1000 / 1.1002 has a 2-pip spread.
- Metals. Gold (XAUUSD) and silver (XAGUSD) spreads are usually read directly in dollars of price. A bid/ask of 4537.87 / 4538.83 on gold is a spread of 0.96 in price units, often described as "96 cents" or "$0.96".
- Indices. Equity indices like DAX 40 are measured in index points. A DAX 40 bid/ask of 25051.80 / 25053.64 is a spread of 1.84 points.
- Oil. Brent (UKOIL) spreads are read in price units (dollars) like metals.
Because the units differ, a raw number such as "9.7 pips" versus "1.84 points" versus "$0.96" cannot be compared directly. The only like-for-like comparison is the monetary cost per lot, covered in the next section.
How to Calculate Your Spread Cost (Spread x Pip Value x Lots)
Spread cost is calculated as the spread (in pips or points) multiplied by the value of one pip or point multiplied by the number of lots traded. In formula form:
Total spread cost = spread (in pips or points) × pip/point value × number of lots
Worked example on EUR/USD. A standard lot (100,000 units) of EUR/USD has a pip value of about USD 10 in a USD-denominated account. At a 9.7-pip spread, the cost to open one standard lot is 9.7 × USD 10 = USD 97. At a more typical active-session spread of, say, 1 pip, the same standard lot would cost 1 × USD 10 = USD 10.
The pip or point value itself depends on the contract size and the lot size, which is why the same spread in pips costs more on a standard lot than on a micro lot. For how lot sizes scale the value per pip, see what is a lot in trading. To estimate the spread cost on any VantoTrade symbol and lot size with live values, use the trading calculator.
Real Cross-Asset Spreads at VantoTrade (Live Snapshot)
Spreads vary widely across asset classes, and the snapshot below shows how they differ on VantoTrade instruments at one moment in time. Important: this snapshot was captured on a Saturday, when the underlying markets are closed and liquidity is at its lowest. These are weekend, low-liquidity quotes, and the spreads shown are deliberately wider than what the same instruments display during active trading hours.
| Symbol | Bid | Ask | Spread (weekend snapshot) | Unit |
|---|---|---|---|---|
| EURUSD | 1.16547 | 1.16644 | 9.7 pips | pips |
| GBPUSD | 1.34421 | 1.34629 | 20.8 pips | pips |
| XAUUSD | 4537.87 | 4538.83 | 0.96 | USD (price units) |
| XAGUSD | 75.212 | 75.345 | 0.133 | USD (price units) |
| DAX40 | 25051.80 | 25053.64 | 1.84 | index points |
| UKOIL | 94.266 | 94.297 | 0.031 | USD (price units) |
Source: VantoTrade calculator data, weekend low-liquidity snapshot 2026-05-30. Spreads tighten when liquidity is high during the main trading sessions.
The teaching point is in the framing. These are variable (floating) spreads, so the weekend figures above are not the spreads a trader would see during the London or New York sessions. When liquidity is high, the gap between bid and ask compresses, and on a major like EUR/USD that can mean a spread a fraction of the weekend figure. Gold spreads in particular are sensitive to session timing; for when gold liquidity is deepest, see the best trading sessions for gold. The cross-asset contrast also shows why the unit matters: EUR/USD and GBP/USD are read in pips, gold and silver and oil in dollars of price, and DAX 40 in index points, so the numbers are only comparable once converted to a cost per lot.
Fixed vs Variable (Floating) Spreads Explained
A fixed spread stays constant regardless of market conditions, while a variable (floating) spread changes continuously to reflect live liquidity and volatility. The two models trade off predictability against market accuracy.
| Feature | Fixed spread | Variable (floating) spread |
|---|---|---|
| Behaviour | Constant value set by the broker | Changes with live market conditions |
| Predictability | High; the cost is known in advance | Lower; the cost varies moment to moment |
| Behaviour in calm markets | Stays the same | Often tightens (narrower) |
| Behaviour in volatile or thin markets | Stays the same | Widens (wider) |
| Reflects underlying market | No | Yes |
A fixed spread offers predictability because the cost is the same whether the market is calm or volatile, but it is a price the broker sets rather than one drawn directly from live interbank liquidity. A variable spread mirrors real conditions: it can be very tight when liquidity is deep and wider when liquidity dries up. Neither model is inherently superior; they suit different conditions and account types. VantoTrade quotes variable spreads, which is why the weekend snapshot above is wider than an active-session quote.
Why Spreads Widen: Low Liquidity, High Volatility, and News Events
Variable spreads widen when there are fewer participants willing to trade (low liquidity) or when prices are moving fast (high volatility), and both conditions often peak around major news. The spread reflects how easily a market maker can offset the other side of a trade; when that becomes harder or riskier, the gap between bid and ask grows.
Common situations where spreads widen:
- Weekends and market closes. With the underlying markets closed, liquidity is thin, which is exactly why the snapshot above shows EUR/USD at 9.7 pips instead of the much tighter spread seen mid-session.
- Session gaps and rollover. The period around the daily rollover and between major session closes (for example, after New York closes and before Tokyo opens) tends to have thinner liquidity.
- Major economic releases. Around scheduled events such as central bank decisions or inflation data, a pair that normally shows a 1-pip spread can briefly widen to 5 to 10 pips or more as liquidity providers step back. For how one such release moves metals, see how US CPI day moves gold and silver.
- Unexpected shocks. Sudden news outside scheduled releases can widen spreads sharply and briefly.
A wider spread during these periods is a feature of how variable pricing reflects risk, not a malfunction. A related cost that appears in fast markets is slippage, where the fill price differs from the requested price; for the distinction, see what is slippage in trading.
Spread vs Commission: Which Costs You More?
The spread and the commission are two different ways a broker can charge for execution, and the all-in cost depends on the account model rather than on either figure alone. On a spread-only account, the entire cost is built into the bid/ask gap and there is no separate charge. On a commission-based (often "raw" or "zero") account, the quoted spread is tighter but a fixed commission is charged per lot on entry and exit.
| Cost element | Spread-only account | Commission-based account |
|---|---|---|
| Where the cost sits | Inside the bid/ask spread | Tighter spread + separate commission per lot |
| Visibility | Embedded in price | Itemised as a charge |
| All-in cost | Spread cost only | Tighter spread cost + commission |
To compare them fairly, both have to be reduced to a single all-in cost per lot. For example, a spread-only model charging the equivalent of about USD 10 per standard lot of EUR/USD is comparable to a raw-spread model that charges a smaller spread plus a commission that, added together, reach a similar figure. Neither is universally cheaper; the total cost per lot is what matters, and it depends on the instrument, the account type, and the size traded. Margin is a separate concept again (the deposit required to open a position rather than a cost of execution); see what is margin in trading.
How the Spread Affects Your Profit (With Examples)
The spread reduces profit and adds to loss because every position must overcome the spread before it reaches break-even. The effect is largest, in relative terms, on small or short-lived price moves and on traders who open many positions.
Worked example. A trader opens one standard lot of EUR/USD at the ask of 1.16644 during an active session where the spread is 1 pip (so the bid is 1.16634). At the moment of opening, the position is marked against the bid and shows a loss of 1 pip, or USD 10. If the price then rises so the bid reaches 1.16644, the position is back to break-even; only above that does it show a profit. The spread has, in effect, set the starting line 1 pip behind.
Who the spread affects most:
- Scalpers and intraday traders open and close many positions and target small moves, so the spread is a large fraction of each trade's potential result and the cumulative cost across many trades adds up quickly.
- Swing and position traders hold for longer and target larger moves, so a fixed spread is a smaller fraction of the target, though overnight swap then becomes a larger consideration.
This is a mechanical relationship between cost and the size of the move, not a statement about which approach performs better.
How to Reduce the Impact of the Spread
The impact of the spread is reduced by trading instruments and conditions where variable spreads are naturally tighter and by sizing the spread cost relative to the intended move. These are mechanical observations about cost, not recommendations about when or what to trade.
- Liquidity timing. Variable spreads on a given instrument are typically tightest when its market is most liquid, such as the London and New York overlap for major forex pairs and gold. The weekend snapshot above illustrates the opposite end of that range.
- Instrument selection. Highly traded majors tend to carry tighter spreads than less liquid instruments; the cost per lot, not the headline pip number, is the comparison that matters.
- Cost relative to the move. A given spread is a smaller proportion of a larger intended price move, which is the mechanical reason the same spread weighs more heavily on very short-term trades.
- Account model. A commission-based account may carry a tighter quoted spread, but the all-in cost per lot (spread plus commission) is the figure to compare.
For a broader view of how spread, swap, margin, and contract sizes fit together across asset classes, the commodities trading pillar and the indices trading guide cover the mechanics across the catalogue.
Frequently Asked Questions About the Spread
What is the spread in trading in simple terms?
The spread is the gap between the two prices shown on every quote: the bid (where you sell) and the ask (where you buy). It is the built-in cost of opening a position, because you buy at the higher ask price and would close by selling at the lower bid price. The difference between them is what you pay to trade.
How is the spread calculated?
The spread is calculated as the ask price minus the bid price. For example, a EUR/USD quote of 1.16547 / 1.16644 has a spread of 1.16644 - 1.16547 = 0.00097, which equals 9.7 pips. The monetary cost is then the spread multiplied by the pip or point value multiplied by the number of lots.
Is a high spread good or bad for traders?
A wider spread means a higher cost of entry, because the price has to move further before a position reaches break-even. A narrower spread means a lower cost. This is a mechanical relationship between spread width and cost; it is not a directional signal and does not predict whether a trade will be profitable.
Do you pay the spread when you buy or when you sell?
The spread applies to both. A buy opens at the higher ask and closes at the lower bid; a sell opens at the lower bid and closes at the higher ask. Either way, the position must recover the full spread before reaching break-even, so the cost is incurred once per round-trip regardless of direction.
What is a normal spread on EUR/USD?
EUR/USD is one of the most liquid instruments, so its variable spread is typically among the tightest during active sessions. The exact figure changes continuously with liquidity. The 9.7-pip figure in the snapshot above is a weekend, market-closed reading and is deliberately wider than an active-session quote; live values for any VantoTrade symbol are visible in the trading calculator.
Why do spreads widen during news and at the weekend?
Variable spreads widen when liquidity is low or volatility is high. At the weekend the underlying markets are closed, so liquidity is thin and spreads widen. Around major news, liquidity providers temporarily step back as prices move quickly, so a pair that normally shows about 1 pip can briefly widen to 5 to 10 pips or more.
What is the difference between a fixed and a variable (floating) spread?
A fixed spread stays constant regardless of market conditions, offering predictability but set by the broker rather than the live market. A variable (floating) spread changes continuously to reflect live liquidity and volatility, tightening in deep, calm markets and widening in thin or volatile ones. VantoTrade quotes variable spreads.
Is it better to pay the spread or a commission?
Neither is universally cheaper. A spread-only account builds the whole cost into the bid/ask gap; a commission-based account quotes a tighter spread but adds a separate per-lot charge. The fair comparison is the all-in cost per lot (spread plus any commission), which depends on the instrument, account type, and size traded.
Key Takeaways
- The spread is the difference between the bid and ask price (spread = ask - bid) and is the built-in cost of every CFD position.
- The ask is always higher than the bid, so a position opens at the ask and closes at the bid, starting at a loss equal to the spread.
- Spread is measured in pips on forex, in dollars on gold and silver, and in points on indices; only the cost per lot is comparable across them.
- Variable spreads widen when liquidity is low or volatility is high, which is why the weekend snapshot is wider than an active-session quote.
- Total spread cost equals the spread multiplied by the pip or point value multiplied by the number of lots; it is a mechanical calculation, not a trading signal.
Estimate Your Spread Cost on VantoTrade
To see live bid, ask, and spread on every VantoTrade symbol and estimate the cost for any lot size, open the trading calculator or check the symbol specification panel inside MT5. For the unit that underpins forex spread measurement, see what is a pip in trading; for the related execution and holding costs, see what is slippage in trading, what is margin in trading, and what is swap in trading. For a higher-level view of CFD mechanics across asset classes, the commodities trading pillar covers spread, swap, and contract sizes across the catalogue.
Risk warning. Trading securities, futures, options, and contracts for differences are complex financial instruments that require knowledge and understanding. Prices can fluctuate significantly and securities may become valueless. Investors may incur losses exceeding the potential for profits. Trading on margin can result in losses greater than the amount initially deposited. Past performance is not necessarily a guide to future performance. The information in this article is for educational purposes only and does not constitute investment advice, a recommendation, or an offer to buy or sell any financial instrument. Consider whether CFD trading is appropriate for your circumstances and seek independent advice if necessary.
