What is a spread, and why it is your real cost

Every market quotes two prices at once: the bid, what you can sell at, and the ask, what you can buy at. The gap between them is the spread. It is the first cost you pay on every single trade, before commission, before swap, before anything, and it is invisible because it sits inside the price rather than on a statement.

A worked example

EUR/USD is quoted 1.0850 / 1.0851. You buy at 1.0851. Price does not move. You sell at 1.0850. You are down one pip. On a standard lot, where one pip is $10, that round trip cost $10 before anything happened.

Now scale it. Here is the same trade at spreads you will actually meet:

The bottom row is not invented. HFM advertises Premium accounts from 1.4 pips; we opened a funded account and measured EUR/USD at 2.7 pips in the London session. On XM Standard, published 1.6, we measured 2.0. Advertised and actual are different numbers, and only one of them leaves your account.

Why "spreads from 0.0 pips" tells you almost nothing

The word from is doing all the work. That figure typically describes the best moment, on the most liquid pair, on the account tier that also charges a commission quoted separately. It is not a lie and it is not useful.

The only honest comparison is spread plus commission, at the hours you actually trade. A raw-spread account at 0.2 pips plus $7 per lot round turn costs about $11 per standard lot. A no-commission account at a real 2.0 pips costs $20. The one that looks cheaper on the homepage is the expensive one.

When spreads widen, and why it always happens at the worst time

• Session rollover, roughly 22:00 to 23:00 UTC, when the New York close meets the Asian open and liquidity thins out.
• News releases. Spreads can multiply by ten in the seconds around a rate decision or inflation print, which is also when your stop is most likely to be hit.
• Weekends and listings in crypto, when market makers step back.
• Exotic pairs, permanently. USD/ZAR or USD/TRY carry structurally wider spreads at every hour of the day.

This is the usual reason a strategy that backtested well loses money live. The backtest assumed one spread; the strategy trades at the hours when the real spread is three times that.

Spread versus commission

Brokers recover their cost one of two ways. Standard accounts widen the spread and charge no commission. Raw or ECN accounts pass through a near-interbank spread and charge a separate per-lot fee. Neither is automatically cheaper. The useful property of a raw account is transparency: you can see whether a widening spread came from the market or from the broker.

What the spread does to your strategy

If your target is twenty pips and the spread is two, you are giving away 10% of the move before you start. If your target is three pips, the same spread takes two thirds of it and the strategy cannot work no matter how good your entries are. Scalping is not impossible, but it is only possible on a venue whose costs support it, and most retail accounts do not.

What to do with this

• Compare the all-in cost, never the headline spread.
• Trade instruments during their own session. London and New York for the majors.
• Avoid holding through scheduled news if your stop is tight, because spread widening alone can take you out.
• Check the real spread yourself on a funded account before committing size. We publish what we measured in our broker reviews and mark anything unverified as testing in progress rather than guessing.

Next: the thing that makes every one of these costs bigger.