Spreads

As with all financial products, Forex quotes include a “bid” and an “ask”. The bid is the price at which a market maker (such as MFGtrader) is willing to buy (and the trader can sell) the base currency in exchange for the counter currency. The ask is the price at which a market maker is willing to sell (and the trader can buy) the base currency in exchange for the counter currency.

The difference between the bid and ask prices is referred to as the spread. The spread is measured in pips (smallest difference in price movement) and is typically around five points in normal market conditions. For example, GBP/USD 1.5847/52 means that a trader can sell the pound against the US Dollar for 1.5847 and buy at 1.5852. Unlike other financial markets, Forex spreads remain constant regardless of the currency price movement, however highly liquid crosses such as EUR/USD will have smaller spreads, while extremely illiquid pairs like AUD/NZD have much larger spreads.