How the bid-ask spread works
The bid-ask spread is the gap between the highest price buyers will pay (the bid) and the lowest price sellers will accept (the ask). You buy at the ask and sell at the bid, so the spread is an instant cost you pay on every round trip. It is the most basic transaction cost in any market, and it widens when liquidity is thin and tightens when it is deep.
Worked example
A pair shows a bid of 1.0849 and an ask of 1.0850, a one-pip spread. If you buy at 1.0850 and sell immediately at 1.0849, you lose one pip without the price moving at all, the spread is simply the broker and market’s cut. On a standard lot that is about $10. On a thin instrument the spread might be ten pips, making frequent trading far more expensive.
Spreads on Volity
The spread is why liquid instruments are cheaper to trade. On Volity, dynamic spreads on major pairs can tighten toward a fraction of a pip during peak liquidity, so the round-trip cost stays low. Spreads widen in quiet hours and around news, which is exactly when to be cautious, especially for high-frequency styles like scalping.
Why it matters
The spread is a cost you pay on every single trade, so it quietly compounds for active traders and decides whether a high-frequency strategy can even be profitable. Always know the spread before you enter. Related: spread in forex and slippage.
Learn more in our forex trading guide.
