What are trading spreads?
In online tradingWhat is online trading and how does it work? Online trading ... More, spreadWhat are trading spreads? In online trading, spread is the d... More is the difference between the ask and the bid priceA bid price is the price a prospective buyer is willing to p... More of a . In , it is usually measured in .
In marketWhat are value stocks? A value company is a company that app... More theory, the spread is the difference between the currently highest priceWhat are value stocks? A value company is a company that app... More a bidder is offering and the currently lowest priceWhat is price? The price is the measure of the value of good... More a seller is asking for. As different bidders and askers might only be willing to buy certain , and because there are small time delays in the market prices, the spread is in practice influenced by a large set of .
This is also the reason why in very markets — markets with many active traders — the spread is usually much lower than in markets that are not very liquid.
In forex trading, this has the effect that often, the spread is lowest on (trading and ), as it is the most traded .
usually take a markupMarkup is the amount added to the spread by a straight-t... More on the spread as their source of revenue. The spread is a part of the for every traderWhat is a trader? A trader is a person who buys and sells... More. That is why the spread on different financial instruments and is an important factor when choosing a brokerWhat is an online broker? In online trading, a broker is a ... More.
More on spreads
Let’s consider an example of a spread.
If the price of the EUR/USDEUR/USD is a currency pair consisting of the euro and t... More is listed as bid 1.0000 and ask 1.0001, the seller would be able to sell their position at 1.0000 while a buyer would have to pay the price of 1.0001. This means the currencyWhat is currency? Currencies are the generally accepted medi... More spread, in this case, is 0.0001. The usual measure for the spread is pips and so the spread would be 1 pip.
There are two types of spread: fixed and floating.
Fixed spread
A fixed spread refers to a fixed number of pips set as a spread by a broker. The spread does not change, even during the release of and Asian forex trading session activity.
Variable or floating spread
A floating spread means that the number of pips you pay as a spread are subject to change by a broker. For instance, if you enter a buy orderWhat is a trade order? In trading, an order can be defined... More at a particular time in the day, then the spread may be 2 pips. During heightened periods of , such as when a news report is released or low periods of low volumeWhat is the trading volume? In trading, volume refers to t... More such as the Asian session, the spread may increase to 3 or 4 pips.
