The spread is the difference between the bid price, what buyers will pay, and the ask price, what sellers will accept, and it is the first cost you pay on every trade. When you open a buy order you pay the ask, and the position immediately shows a small loss equal to the spread until price moves in your favour by at least that amount. On EUR/USD a spread of one pip on a mini lot costs about one dollar, which sounds trivial, but a trader who takes two hundred trades a year pays two hundred dollars in spreads alone before commissions, swaps or losses are counted. Spreads are not a scam, they are how brokers and liquidity providers are paid, but ignoring them is like running a shop without counting rent: the business can look profitable trade by trade while slowly leaking money.

A fixed spread stays the same regardless of market conditions, so EUR/USD might always cost two pips whether the market is calm at noon or chaotic during a news release. That predictability helps beginners plan costs and makes scalping maths simple, because the break-even distance never changes without warning. The trade-off is that fixed spreads are usually wider than the best variable spreads during quiet hours, so a calm-market trader overpays on every trade, and some brokers widen fixed spreads anyway during extreme volatility or requote orders when prices move fast. Fixed spreads suit traders who value cost certainty, trade mainly around news events, or use strategies where a surprise spread spike would break the plan.

A variable, or floating, spread moves with market liquidity, and it can be as low as a fraction of a pip on major pairs during the London and New York overlap. That makes variable spreads attractive for active traders and scalpers, who may save hundreds of dollars a year compared with a fixed two-pip spread. The catch is that spreads widen sharply when liquidity thins: overnight, during holidays, and in the seconds around major news releases, a spread that was 0.8 pips can jump to five or ten pips. A stop loss placed close to price can be triggered by that widening alone, even if the underlying price never reached your level, which is why variable-spread traders avoid holding tight stops through news and check their broker's typical and maximum spreads before choosing an account.

Spreads hurt most when trades are short and frequent. A scalper targeting five pips with a two-pip spread gives away forty percent of the target before the trade even starts, and needs a win rate far above fifty percent just to break even. A swing trader targeting two hundred pips with the same spread gives away only one percent, so spread choice barely matters. This is why comparing brokers on spreads alone is misleading: a broker with a 0.5 pip spread plus a seven dollar commission per round turn can cost more than a broker with a 1.2 pip spread and no commission, depending on your lot size. Always calculate the all-in cost per trade in dollars, including commission, and compare it with your average target: if costs exceed ten to fifteen percent of your typical profit target, either your strategy needs larger targets or your broker is too expensive for your style.

If you trade a few times a week with targets above fifty pips, either spread type works and regulation, execution quality and withdrawal reliability matter more than a fraction of a pip. If you scalp or trade news, a variable spread with a reputable broker usually wins during liquid hours, provided you avoid the news spike itself or accept wider stops around it. If you trade exotic pairs, expect wider spreads of several pips as normal, because fewer banks quote those currencies, and factor that into your targets rather than complaining about it afterwards. This article is educational content only and is not financial advice; trading forex involves substantial risk of loss, so never risk money you cannot afford to lose. Finally, watch for spread widening as a warning sign: if your broker's spreads are consistently far wider than competitors at the same time of day, that is a real cost and a reason to shop around, not a detail to ignore.