What is a spread in forex?

In forex trading, the spread is the difference between the bid (sell) price and the ask (buy) price of a currency pair or instrument. It represents the primary cost of opening a trade. When you open a position, you instantly start at a slight loss equal to the spread.

How to calculate spread from bid and ask

To calculate the raw spread, you simply subtract the bid price from the ask price. For example, if the bid is 1.0500 and the ask is 1.0502, the raw spread is 0.0002. Depending on the instrument's point and pip sizes, this raw value is then converted into points and pips.

How spread cost is calculated

The spread cost in your account currency depends on your lot size and the tick value (or pip value) of the instrument. The formula is: Spread Cost = Spread in Ticks × Tick Value × Lot Size.

Spread vs commission

Some brokers offer "Standard" accounts with zero commission but wider spreads. Others offer "Raw" or "ECN" accounts with spreads close to zero, but charge a fixed commission per lot. Your All-In Cost is the sum of your spread cost and your commission cost.

Why gold spread can look different in points and pips

Gold (XAUUSD) pricing conventions often use a point size of 0.01 and a pip size of 0.10. Therefore, a raw spread of 0.23 means 23 points, which equals 2.3 pips. It's important to know your broker's pip definition to calculate costs accurately.

How to use the forex spread calculator

Start by selecting your instrument from the dropdown — this automatically fills in the correct point size, pip size and tick size. Then enter the live bid and ask prices directly from your broker's platform. Set your lot size and, if your broker charges commission, select the commission mode and enter the amount. The calculator instantly shows your spread cost, commission cost, all-in cost and break-even pips. The Cost Quality Rating then compares your all-in cost against real broker data tracked over seven days, so you can see whether your broker is competitive.

What does the Cost Quality Rating mean?

Excellent means your all-in cost is among the lowest tracked across monitored brokers. Good means your cost is below the market average. Fair means you are paying around the average. Expensive and Very Expensive mean your total cost is significantly above what competing brokers offer for the same instrument. The rating compares your spread plus commission in pips against a 7-day average from real broker feeds, so it reflects actual market conditions rather than advertised minimums.

How to reduce trading costs

To minimize your trading costs, compare brokers using our Cost Quality Rating. Trading during highly liquid hours (like the London/New York overlap) typically ensures tighter spreads. Additionally, calculate your break-even pips before entering a trade to ensure your strategy covers the costs.

Monitor spreads live in MetaTrader with a free indicator

The Spread Monitor Pro indicator brings spread awareness directly onto your chart. It displays the current spread in pips alongside a rolling minimum, maximum, and average so you can instantly judge whether today's conditions are tight or wide for your instrument. A status badge — LOW, NORMAL, HIGH, or VERY HIGH — updates in real time by comparing the live spread against its own historical baseline. The indicator also converts spread into a cost-per-lot figure in your account currency and supports configurable alerts when spreads cross thresholds you define. A separate commission-adjusted mode combines spread and commission so your true all-in cost is always visible without switching between tools. The panel is collapsible and draggable, works across all symbols including forex, gold, silver, indices and crypto, and is available free for both MetaTrader 4 and MetaTrader 5.