The difference between the bid (sell) price and the ask (buy) price quoted by a broker.
The spread is the principal transaction cost embedded in every retail forex trade. When EUR/USD is quoted at 1.08500 / 1.08502, the spread is 0.2 pips - the trader immediately starts 0.2 pips offside the moment the position opens. Unlike a brokerage commission, the spread is implicit and automatic, which can cause traders to underestimate its cumulative impact across a large volume of trades.
Spread levels vary along three main axes. First, the currency pair: major pairs like EUR/USD and USD/JPY attract the tightest spreads because of their enormous daily turnover; exotics such as USD/TRY or USD/ZAR carry spreads that can be 10–50 times wider. Second, the time of day: spreads widen during session transitions (Asian close / European open), over weekends, and in the minutes around high-impact data releases like NFP or CPI. Third, the broker's execution model: market-maker brokers often quote wider, fixed spreads; ECN and STP brokers quote raw variable spreads and charge a separate per-lot commission.
When comparing brokers, traders should calculate the all-in cost per standard lot - effective spread (in pips × pip value) plus any commission - rather than reading headline spread figures in isolation. An ECN account showing 0.0 pips spread may be cheaper than a commission-free account quoting 1.2 pips once the per-lot fee is factored in.