Robert Benjamin M470 Adams#19

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What is bid-ask spread in forex and why does it matter?

The bid-ask spread is the difference between the price a broker is willing to buy a currency pair (bid) and the price they are willing to sell it (ask). For example, if EUR/USD has a bid of 1.1000 and an ask of 1.1003, the spread is 3 pips. This spread is effectively the cost of trading, since traders must overcome it before realizing profit. Tight spreads are preferred because they lower transaction costs, especially for scalpers and high-frequency traders. Wider spreads often occur during volatile markets or low-liquidity periods. Choosing brokers with competitive spreads can significantly impact profitability over time.