What is the spread in foreign exchange trading?
What is the spread in foreign exchange trading?
The difference between bidding (selling price) and inquiry (buying price) is called the spread.
For example, when the exchange rate between the pound and the US dollar is 1.34550, the selling price and buying price may be displayed as 1.34560 (selling price) and 1.34540 (buying price), with a spread of 2.0, which means the selling price is 1.0 points lower than the current market exchange rate. To achieve profitability, the price needs to fluctuate by more than 2 points.
Many brokers say that offering a low spread means their buying and selling prices are very close to the market exchange rate. Given that spread is the profit point of brokers, low spread means that transaction fees may be charged based on your trading volume. Investors can decide their choices based on their own trading volume. If the trading volume is large, they can choose a fixed handling fee, while if the trading volume is small, they can choose a spread.
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