Bid, Ask and Spread Explained: The Cost of Every Trade
Every market shows two prices at once:
What you'll learn
- What the bid and ask prices are, and which one you get
- How the spread costs you money on every trade
- When spreads widen, and how to avoid paying more than you need
Two prices, not one
Every market shows two prices at once:
- Bid: the price you can sell at.
- Ask (or offer): the price you can buy at.
The ask is always a little higher than the bid. The gap is the spread. If EURUSD shows 1.08500 / 1.08508, the spread is 0.8 pips (lesson 5 explains pips).
The easy way to remember it: you always buy at the higher price and sell at the lower one.
Why the spread is a cost
Open a long trade and close it a second later with no price change, and you lose the spread. You bought at the ask and sold at the bid. That means every trade starts slightly behind, and the market has to move by the spread before you break even.
Worked example
EURUSD: bid 1.08500, ask 1.08508. You buy 1 standard lot (100,000 euros).
- You pay the ask: 1.08508.
- If you sold straight away you would get the bid: 1.08500.
- Difference: 0.00008, or 0.8 pips. On one standard lot, a pip is worth $10, so the spread costs you $8.
If you trade 10 standard lots a day, that is $80 a day in spread alone, before commission. Spread matters more the more often you trade.
Raw spreads plus commission
Many brokers and prop firms offer two kinds of account:
- Spread only: a wider spread, no commission.
- Raw spread plus commission: a near zero spread, plus a fixed fee per lot (often a few dollars per side).
Neither is always cheaper. Add the spread cost and the commission together for the trades you actually make.
When spreads widen
Spreads are not fixed. They widen when fewer people are quoting prices or when news hits:
- around big news releases (US jobs report, inflation, central bank decisions),
- at the daily rollover around 5pm New York time, when liquidity thins out,
- on Sunday evening when markets reopen,
- on exotic pairs and quiet markets.
A stop loss that would normally be safe can be hit by a spread spike, because a long position is closed at the bid. This is one reason many traders stay flat around major news.
Futures: the tick spread
On busy futures like ES and NQ, the gap between bid and ask is usually one tick (0.25 points) most of the day. You pay commission and exchange fees per contract instead of a wider spread.
How this works at a prop firm
Spreads and commissions differ from firm to firm and even between account types at the same firm, and they hit hardest if you scalp. When comparing firms, check the platform, the commission per lot and whether the firm restricts trading around news. Read about slippage at prop firms and scalping rules, then compare firms in the comparison tool.
Key takeaways
- You buy at the ask (higher) and sell at the bid (lower); the gap is the spread.
- Every trade starts behind by the spread, so it matters most for frequent traders.
- Spreads widen around news, rollover and market opens.
Check yourself
3 quick questions. Your answers stay on this device.
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GBPUSD shows 1.27000 / 1.27012. What price do you get if you buy?
You buy at the ask, the higher price.
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What is the spread in that quote, in pips?
0.00012 = 1.2 pips.
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When are spreads most likely to widen?
Around major news and at the daily rollover.
Go deeper
Educational content, not financial advice. Trading carries a high risk of loss, and most traders lose money. How we make money.