How it works
Every forex pair has two prices at every moment: the bid, where the market will buy from you, and the ask, where the market will sell to you. The gap between them is the spread. Open a position and you start in the red by exactly the spread amount, because you bought at the higher ask but would have to sell at the lower bid to close.
Example
EUR/USD is quoted bid 1.0850, ask 1.0856. The spread is 0.6 pips. On a standard lot that is roughly $6 in immediate cost. A scalper taking 30 round trips a day at 0.6 pips pays $180/day in spread. The same trader at 2.0 pips pays $600/day. Spread is the most underestimated trading cost.
Fixed vs variable
Some brokers quote a fixed spread that stays the same no matter what the market is doing. Most ECN venues quote variable spreads that tighten in liquid hours (London/NY overlap) and widen on news. Variable spreads have a lower average cost but bigger spikes.
Why it matters
Strategy edge is measured against cost. A strategy with a 2-pip average win is dead at 2-pip average spread, profitable at 0.6 pips. Volity’s Standard account quotes from 0.6 pips on EUR/USD.
