Ask and Bid Prices: How the Spread Works and Where a Trader Loses (or Gains) on Forex

Ask and Bid Prices: How the Spread Works and Where a Trader Loses (or Gains) on Forex

Ask and Bid
prices are the basic parameters of any trading instrument on the forex market. They determine the price at which a trader can buy or sell an asset, and the spread between them is the actual entry cost. It is the spread that influences profit, especially in scalping and short-term trading, where every pip matters.

What are Bid and Ask in simple terms?

On the Forex market (as well as in exchange offices and on stock exchanges) there are always two prices :

Bid is the price at which the broker is willing to buy currency from the trader.
Ask is the price at which the broker is willing to sell currency to a trader.

The difference between them is called the spread.

In fact, everything on Forex works like on an exchange—except the volumes are huge, and quotes are updated every millisecond. If you open a buy position, you enter at the ask price; if you sell, you enter at the bid price.

Ask and Bid Prices: How the Spread Works and Where a Trader Loses (or Gains) on Forex

How is the spread measured – pips vs. real money

It is important for a trader to understand that the spread is not just a number in pips, but real money paid for each trade.

Example:

The EUR/USD pair is quoted at 1.2805 / 1.2807.
Bid = 1.2805, Ask = 1.2807.
Spread = 2 pips.

This means that when you open a buy position, you're immediately in the red by these 2 pips. Only after the price rises by this amount will the trade break even.

The spread size directly depends on:

currency pair (EUR/USD has the minimum, Exotic pairs have the higher one),
market liquidity (spreads widen at night),
broker and account type (ECN accounts often offer zero spreads but charge a commission).

Why is spread important for a trader's profit?

Every point in the spread represents a cost to the trader. Therefore, the smaller the spread, the higher the potential profit. This is especially critical for scalping strategies, where trades last from a few seconds to a couple of minutes.

For example:

The scalper opens a trade with a target of +3 pips.
If the spread = 2 pips, the real net profit will be only 1 pip.
If the spread = 0.5 pips, the profit increases 6 times with the same movement.

This is why the EUR/USD and GBP/USD pairs are traditionally the most popular – they have minimal spreads (on average 0–2 pips for the euro and 1–3 for the pound).

How to find out the spread in the trading terminal

You can check the spread size in several ways:

On the broker's website - in the trading conditions section.

In the MetaTrader 4/5 terminal , go to the menu “View → Market Watch” (or Ctrl+M).

When you open an order (F9), the system shows both prices, Bid and Ask, and you immediately see the difference.

Modern platforms, including cTrader and TradingView , allow you to visualize the spread directly on the chart, which is especially useful for active traders.

The market price is always between the Bid and Ask

The chart displays a fictitious market price , but in reality, it 's between the bid and ask.
The buyer wants to buy lower, the seller wants to sell higher, and until their interests align, the deal won't take place.

A unique price corridor is formed within which the market moves. When orders match, execution occurs.

"The market isn't magic, but a compromise between supply and demand. Bid and ask are its visible boundaries," says London-based trader Mark Elliott.

Volumes and the Market Depth: Why a Trader Needs to Know This

Professional market participants see not only current prices but also the order book —the market's depth.
On Forex, this is less transparent than on stock exchanges, but brokers are increasingly providing liquidity data so traders can assess order density.

Even if you don't see the exact ratio of buyers and sellers, analyzing volume can help you determine where the market might turn.

Tip: Compare rising volumes with widening spreads—this often signals a change in volatility.

How brokers make money on spreads

Each broker sets its own spread. It can be:

fixed (for example, always 2 points),
floating (depending on market activity).

When you open a trade, you pay a spread . Part of it is the broker's profit. The rest goes to market makers and liquidity providers (banks or ECN platforms).

Part of the spread can also be shared with the broker's partners —those who brought you in through the referral program.

Geography and Spread Regulation 

Spreads vary not only by pair, but also by region:

In Europe and the UK , brokers are required to disclose their full commission (MiFID II).

In the US (NFA regulation), spreads are generally higher due to leverage restrictions.

In Asia (Singapore, Hong Kong), on the contrary, the spreads are often the tightest due to high liquidity.

On Russian platforms, the spread for EUR/USD is usually 1.2–2 pips, and for GBP/USD – 1.8–3 pips.

How to use knowledge about the spread in your strategy

Choose brokers with minimal spreads on your pairs.

Trade during peak liquidity hours (London - New York sessions).

Avoid entering the market before news releases —at these times, the spread can widen by 5–10 times.

Compare real execution conditions on a demo and real account.


Conclusion

Knowing what Bid and Ask prices are , how the spread is formed, and why it changes is not just a technical detail, but the key to a professional approach to trading.

Understanding the spread helps you choose the best currency pairs, accurately calculate your profits, and avoid falling into the traps of false price movements.

"The spread isn't a trader's enemy, but an indicator of how much it costs to access the market. Learn to read it, and it will start working for you."

Written by Ethan Blake
Independent researcher, fintech consultant, and market analyst.

October 15, 2025

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