Forex Spread is a term you might hear quite often if you’re using Forex Trading System Software. Indeed, getting involved in Forex Trading can mean that you’re introduced to a number of new terms that might seem confusing at first. Thankfully, like most things, the use of the term forex spread can be easily explained.
If you’ve been reading our How To Trade Forex series (and if you haven’t, go have a look now) then you’ll remember that so far one of the things we’ve talked about is currency pairs. If you’ve been looking into currency pairs further you’ll have noted that , although on the news they are often shown as being one value (e.g. USD/GBP 0.66) , when you are getting started in trading they often show as having two prices - a bid price and an ask price.
The bid price is the price at which the people on the market are willing to buy the base currency at in exchange for the quote currency.
The ask price is the price at which the people on the market are willing to sell the base currency at in exchange for the quote currency.
There will always be a small difference between the bid price and the ask price - and this is what we call the forex spread.
So to calculate the forex spread is actually quite easy - all you need to do is work out the difference between the bid and ask prices.
And there we have it - another easy lesson in How To Trade Forex. Happy trading!
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