Direct answer
A point spread in forex is the difference between the buy (ask) price and the sell (bid) price shown by a provider. In many quotes, that difference is expressed in pips (or sometimes “points,” depending on the platform’s naming). The spread represents a built-in cost of trading because you effectively buy at the ask and sell at the bid.
Mechanics: what the quote means
Forex quotes typically include two prices:
- Bid: the price at which you can sell the base currency.
- Ask: the price at which you can buy the base currency.
The spread is calculated as:
- Spread = Ask − Bid
When a provider reports the spread “in points,” it is using the platform’s price increment convention. For example, if a pair is quoted with a fixed decimal structure, one pip (the smallest commonly used measure) corresponds to a specific decimal move; the provider then converts the bid-ask difference into that unit.
A key detail is that spreads are usually not constant. They can change as liquidity conditions and order flow change, even for the same currency pair.
Example and checks (no predictions)
Imagine a provider shows:
- Bid: 1.25000
- Ask: 1.25020
The spread is 0.00020 in price terms. If the market convention treats 0.00010 as one pip for that instrument, then 0.00020 corresponds to 2 pips of spread.
Independent checks you can apply without assuming any future outcome:
- Compare within the same moment: if bid/ask are captured at different times, spreads may differ.
- Confirm unit meaning: “points” on one platform can map to pip fractions or full pips depending on the instrument’s formatting.
- Separate spread from commissions: some providers may add a separate fee, so the total cost is not always “spread only.”
Limitations and what to verify
Spreads are influenced by liquidity and market activity, which can vary over time and around events; therefore, any single displayed spread is only a snapshot. Also, different providers may compute and display “points” differently, so you should verify the platform’s definition and price increment rules for the specific instrument.
Finally, you cannot reliably infer future trading cost or outcomes from a current spread quote. Spreads can widen or tighten after you observe them, and execution may occur at a different moment than the displayed price.