Spread
Also known as: Bid-Ask Spread
The difference between the Bid (sell) price and the Ask (buy) price of an asset.
Plain-English Meaning
The spread is essentially the invisible fee charged by the broker or exchange for executing your trade. When you go to buy, the price is slightly higher than the real market value; when you sell, it's slightly lower. That tiny gap is the spread.
Why It Matters
The spread is a direct cost of doing business. Because you always buy at the higher price and sell at the lower price, every trade technically starts slightly negative. You must overcome the spread before the trade becomes profitable.
Simple Example
If the EUR/USD is quoted with a Bid price of 1.1000 and an Ask price of 1.1002, the spread is 2 pips. If you buy at 1.1002, the market must rise 2 pips just for you to break even.
This educational example uses selected assumptions for reference calculation purposes. Real conditions may vary by broker, exchange, or instrument.
Beginner Mistake
Trading highly volatile or obscure assets during quiet hours without checking the spread. Low liquidity can cause the spread to widen dramatically, making it heavily expensive just to enter the trade.