The spread is a term we often hear in forex trading. Many describe the spread as being the cost of trading. This basically means the extra part you are paying to the broker, who shall be charging you for the trade. To put it simply, consider a currency pair, such as EUR/USD 1.3000. The broker is not going to sell the EUR/USD to the trader at 1.3000. He will up a slightly higher price, such as 1.3002. If the trader is looking to sell, he will pay say 1.2998. The difference between 1.2998 and 1.3002 is of 4 pips. This is the spread. Hence the spread is the difference that exists between the price the broker is willing to buy off the trader to sell.

The strategy of spread trading is to yield the financial backer a net situation with a worth (or spread) that is reliant upon the distinction in cost between the protections being sold. Much of the time, legs are not traded freely yet all things being equal, are traded as a unit on futures exchanges.

In trading and investing, a spread is the difference between two prices, rates, or yields. The most common use is in forex or stock trading, where the spread refers to the gap between the bid price (what buyers are willing to pay) and the ask price (what sellers want). This difference represents a cost to the trader and a source of profit for brokers or market makers. Spreads can be tight, meaning the difference is small, often seen in highly liquid markets, or wide, where the difference is larger, usually in less liquid or more volatile markets. Understanding spreads is important because they directly affect transaction costs and can influence the profitability of a trade.