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What is the Spread

 

What is the Spread ?

Your broker will need to make a little money by offering you the services they do, it’s a business and it’s only fair they make their cut. They do not charge you upfront for anything, there is no cost to open or fund an account. How a broker makes their money from you is by charging you a spread.

This means that when you place a trade, a few pips worth is taken from you automatically. Different currency pairs have different spreads, and of course, different brokers may have slightly different spreads as well.

If the Forex broker you are using has a 2 pip spread on the EUR/USD, when you place your trade, you will notice that you are automatically negative by 2 pips. The broker will have taken the spread right off the top as their payment for enabling you to trade. If you are trading 1 micro lot on a currency pair with a 2 pip spread, you will be down 2 pips as they take their 20 cents, or 20 dollars if you are trading whole lots.
They charge you by the pip, so the greater the pip value, the greater their cut. After that, they don’t care if you win or lose. You can make your 2 pips back and go on to make 500 additional pips. Those additional 500 pips are your profit, and your broker has no interest in them.

 

Edited by Mr Alex Michel from UK. 

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