What is FOREX spread?
The spread is how a FOREX broker makes money. Currencies are quoted in pairs such as USD/GBP. In the example of USD/GBP; USD is the base currency and GBP is the counter currency, or quote currency. If it took 2 GBP to purchase 1 USD then USD/GBP would be 2/1 or 2.
Broker prices will include a spread. The spread is commonly referred to as the bid/ask prices. The bid is the price the broker is willing to buy the base currency (USD) in exchange for the counter currency (GBP). The spread is the difference between the bid/ask quote and is quoted in pips. A pip is 1/100 of one percent. If the quote for a pair is 1.5001/1.5002 then the spread is 1 pip. If the quote for a pair is 1.5001/1.5011 then the spread is 10 pips. Spreads can change by the broker for various reasons including broker profit and market conditions.
Do you have a FOREX question? Ask a question here. No registration required and it takes less than a minute.