Beginner 6 min read · updated 2026-05-25

Forex Spread Explained: How It Works & How to Find the Tightest

The forex spread is the difference between bid and ask price — your real cost to trade. Learn how spreads work, what's a fair spread, and how to find the tightest.

What is the forex spread?

The spread is the difference between the bid price (the price your broker will buy from you) and the ask price (the price they’ll sell to you). It’s measured in pips and represents your effective cost of opening a trade.

When EUR/USD shows:

Bid: 1.0875
Ask: 1.0877

The spread is 0.0002 = 2 pips. You’d buy at 1.0877 and need price to rise to 1.0877 + 2 pips just to break even on transaction cost.

How spreads vary

Spreads are dynamic — they change throughout the day based on:

Market session — tightest during the London/NY overlap (13:00–17:00 UTC); wider during Asian session
Volatility — spreads widen 5–10x during major news releases
Liquidity — major pairs (EUR/USD) have tighter spreads than exotics (USD/TRY)
Broker type — ECN brokers vs. market makers structure spreads differently
Account type — Raw/ECN accounts have tighter spreads but charge commission

Spread types: variable vs. fixed

Variable spread

Spreads fluctuate with market conditions
Tightest in liquid sessions (often 0.0–0.3 pips on EUR/USD)
Wider during news/illiquidity (3–10 pips during NFP, FOMC)
Most common type — offered by virtually all major brokers
Best for: active traders who avoid news events

Fixed spread

Spread stays constant regardless of market conditions
Typically wider during normal hours (1.5–3 pips on EUR/USD)
Doesn’t blow out during news — useful for news traders
Less common — offered by easyMarkets, AvaTrade, some others
Best for: news traders who need predictable execution costs

Spread + commission = true cost

ECN/Raw accounts often advertise “0.0 pip spreads” — but they charge a per-lot commission. To compare apples to apples, add commission converted to pip-equivalent:

Worked example — Pepperstone Razor account

Spread: 0.0 pips on EUR/USD
Commission: $3.50 per lot per side = $7 round-turn
1 lot = $10 per pip → $7 commission = 0.7 pips equivalent
Total cost: 0.0 + 0.7 = 0.7 pips

Same comparison — Pepperstone Standard account

Spread: 1.0 pips on EUR/USD
Commission: $0
Total cost: 1.0 pips

The Razor account is ~30% cheaper for an active trader on EUR/USD.

For 50+ trades/month, the Razor account saves $50–200+ in costs.

What’s a “fair” spread on each pair?

Reference table for what well-priced brokers typically offer during liquid hours:

Pair	Tight ECN (0.0 + commission)	Standard account (no commission)
EUR/USD	0.0–0.3 pips + $7/lot	0.6–1.2 pips
GBP/USD	0.2–0.6 pips + $7/lot	1.0–2.0 pips
USD/JPY	0.2–0.5 pips + $7/lot	0.8–1.5 pips
AUD/USD	0.4–0.8 pips + $7/lot	1.2–2.0 pips
USD/CAD	0.5–1.0 pips + $7/lot	1.5–2.5 pips
Gold (XAU/USD)	15–35 cents + $7/lot	40–80 cents
Bitcoin	$5–30 spread	$20–80 spread

Red flags to avoid:

EUR/USD spread above 1.5 pips on a standard account
Any pair where commission isn’t disclosed
Brokers advertising “from 0.0 pips” without disclosing the commission

Brokers with the tightest spreads

Among regulated brokers we review, the lowest total cost (spread + commission) on EUR/USD:

Broker	Account	Cost on EUR/USD
Tickmill	Pro	0.0–0.2 pips + $2/lot = ~0.5 pips
IC Markets	Raw	0.0–0.2 pips + $3.50/lot = ~0.7 pips
Pepperstone	Razor	0.0–0.2 pips + $3.50/lot = ~0.7 pips
Exness	Zero	0.0 pips + $0.05–$3.50/lot = ~0.5 pips
Eightcap	Raw	0.0–0.2 pips + $3.50/lot = ~0.7 pips

For high-volume traders, Tickmill Pro has the lowest per-trade commission ($2/side vs. industry-standard $3.50).

Hidden costs that aren’t in the spread

The spread is only one cost layer. Also consider:

Swap fees — overnight interest charges on held positions (avoided with Islamic accounts)
Withdrawal fees — some brokers charge $5–25 per withdrawal
Inactivity fees — typical $5–50/month after 3–12 months dormant
Currency conversion fees — depositing in USD to a EUR account costs 0.5–2%
Slippage — actual fill vs. expected fill, especially during news

Quick FAQ

Why does spread widen during news? Liquidity providers withdraw quotes when prices are about to move sharply, leaving fewer market makers — wider spreads.

Is a 0.0 pip spread real? Yes — ECN brokers route orders to multiple liquidity providers and often the best bid + ask come from different providers, eliminating the spread momentarily. The broker’s revenue comes from per-lot commission.

Can I trade without paying spread? No — every trade has a spread component. Even commission-free brokers earn from spread.

Is a wider spread always bad? For high-frequency scalping, yes. For position trading where targets are 100+ pips, a 2-pip vs 0.7-pip spread is negligible (2% of target vs 0.7%).

Why are exotic-pair spreads so wide? Lower liquidity = fewer market makers = wider spread. Pairs like USD/TRY can have 20–50 pip spreads even in liquid hours.