Direct answer
In forex, spread usually means the difference between the bid price and the ask price for a currency pair. The bid is the price at which a market participant is willing to buy the base currency, while the ask is the price at which they are willing to sell it. The spread is often expressed in pips (a pip is a standard small price move in forex quoting).
Explanation: how the bid-ask spread works
A currency pair quote gives you two numbers:
- Bid: what buyers pay.
- Ask: what sellers ask.
Because the ask is higher than the bid, you can’t buy and immediately sell at the same price. The spread represents the built-in difference at the moment of execution. In practical terms, the spread functions like an immediate cost: if you enter at the ask and later exit at the bid, the spread has to be “covered” by price movement before you see movement in your favor.
Spreads are typically quoted in one of two ways:
- Spread-only pricing: the cost is embedded in the bid-ask gap.
- Commission plus spread/markup: the cost is split between a commission (fee) and the bid-ask difference. Exact details depend on the quoting and fee model of the specific trading environment, so it is worth checking how a provider states its pricing structure.
Example and independent checks
Assume a forex quote shows:
- Bid = 1.10000
- Ask = 1.10020
The spread is 0.00020. With many common EUR/USD-style quoting conventions, that corresponds to 2 pips, though pip size can vary by pair and quoting format.
To verify the concept independently:
- Observe both numbers on the quote screen and compute ask − bid.
- Compare that computed value with the spread figure shown in the interface (if one is provided).
Also note that spreads can change even for the same currency pair. When liquidity decreases or volatility increases, the bid and ask may move farther apart, which increases the spread.
Limitations and uncertainties (material constraints)
- Spread is not the only cost: execution may involve commissions, swaps, or other fees depending on the setup.
- Spread depends on the moment and the venue: quotes are time-dependent, and different market participants can show different bid-ask levels.
- No guaranteed relationship: a “wider” or “lower” spread does not, by itself, predict future price direction.
- Because you can’t observe future outcomes, spread should be treated as a present cost/quote condition, not a forecast.
If you want the most accurate interpretation for your situation, use the quote you see now and the provider’s pricing description, then compute the spread directly as ask minus bid.