Ever opened a trade and it was already showing a small loss, before the price even moved? That's not a bug and it's not your broker cheating you. That's the spread, and it's on every single trade you'll ever place.
What Is the Bid-Ask Spread?
Every tradeable price actually has two prices attached to it at any moment:
- Bid: the price you can sell at right now
- Ask (also called "offer"): the price you can buy at right now
The ask is always a little higher than the bid. That small gap between the two is the spread, and it's a built-in cost baked into every trade, separate from any commission your broker might also charge.
A Simple Example
Say XAUUSD shows a bid of $2,350.00 and an ask of $2,350.30. That's a 30-cent spread. If you buy right now, you buy at $2,350.30. If you immediately tried to close that same trade, you'd sell at the bid, $2,350.00, a 30-cent loss before the market has moved at all.
| Bid | Ask | Spread | You Buy At | Price Needed to Break Even |
|---|---|---|---|---|
| $2,350.00 | $2,350.30 | $0.30 | $2,350.30 | Price must reach $2,350.30 bid |
Why Does the Spread Exist?
Brokers and market makers provide liquidity, the ability for you to buy or sell instantly, right now, without waiting for someone else to place a matching order. The spread is how they get compensated for standing ready to take the other side of your trade at any moment.
Spread Isn't Fixed, It Moves
Spreads tend to be tightest when a market is most active and liquid, for XAUUSD that's typically during the London/New York session overlap. They can widen noticeably during low-liquidity periods (like the tail end of the Asian session) or spike sharply around major news releases, when market makers protect themselves against sudden volatility.
This matters for entry timing: entering right before a big news release, when spreads can widen dramatically, can quietly cost far more than it looks like on the chart.
Why This Belongs in Your Risk Math
Spread is a real, unavoidable cost, it should be factored into your risk:reward calculation the same way a stop-loss distance is. A tight scalp trade with a 10-point target and a 3-point spread is giving up nearly a third of the target before the trade even starts moving. Knowing your typical spread is part of knowing your actual edge, not just your strategy on paper.
FAQ
What is the bid-ask spread?
The bid is the price you can sell at, the ask is the price you can buy at. The ask is always slightly higher. That gap is the spread, a built-in cost on every trade.
Why does the spread exist?
It's how brokers and market makers get paid for providing liquidity, letting you buy or sell instantly.
How does spread affect my trade?
You're already down the size of the spread the moment you open a trade, before the market has moved at all.
Does the spread stay the same all day?
No, it's typically tighter during high-liquidity hours and can widen around news releases or low-liquidity periods.
Know the toll before you cross the bridge. 📈
Disclaimer: This article is for entertainment and educational purposes only. It is NOT financial advice. Spread figures shown are illustrative, actual spreads vary by broker, instrument, and market conditions. We're not responsible for the decisions you make.