Bid and Ask Rate in Forex: Complete Guide to Spreads & Costs 2025

The bid and ask rate in forex is the foundation of every single transaction. It helps the market work and is the main cost you will face as a trader.

　　Understanding this concept is not optional. This guide will go beyond simple definitions to help you understand how these rates affect your profits and strategy.

What Are Bid and Ask？

　　The bid and ask rate shows a two-way price quote for any currency pair. These two prices determine where you can enter and exit a trade.

The Quick Answer

　　The bid price is the price at which a broker will buy the base currency from you in exchange for the quote currency. This is the price at which you can sell.

　　The ask price is the price at which a broker will sell the base currency to you. From your view, this is the price at which you can buy.

　　Think of a currency exchange desk at an airport. They always have two prices for a currency pair like USD/EUR. The exchange buys your US dollars at a lower rate (their bid) and sells US dollars to you at a higher rate (their ask).

Why Ask is Higher

　　The ask price is always higher than the bid price. This difference is known as the spread.

　　The spread is not just a random gap. It is the main way that most forex brokers make money. By buying from traders at the bid price and selling to other traders at the ask price, they profit from the difference.

The Spread Explained

　　The spread is the most basic cost of trading. Before you can make any profit, your trade must first overcome the cost of the spread. Learning this concept is key for managing your trading money well.

Calculating the Spread

　　Calculating the spread is simple. You subtract the bid price from the ask price. The result is usually shown in pips, which is the standard unit of movement in forex.

　　The formula is: Ask Price - Bid Price = Spread

　　Let's use an example with the EUR/USD pair. Imagine your trading platform shows:

• Bid: 1.0752
• Ask: 1.0753

　　The calculation would be 1.0753 - 1.0752 = 0.0001. Since for most pairs a pip is the fourth decimal place, this difference of 0.0001 equals a spread of 1 pip.

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　　EUR/USD Example:

　　Ask Price: 1.0753

　　Bid Price: -1.0752

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　　Spread: 0.0001 = 1 Pip

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Fixed vs. Variable Spreads

　　Brokers offer spreads in two main forms: fixed and variable.

　　Fixed spreads don't change no matter what the market is doing. They are easy to predict because you always know your cost. But they are often wider than the lowest variable spreads.

　　Variable spreads change all the time. They can be very tight during busy market times. The downside is that they can get much wider during news events or quiet market periods.

A Practical Trade Walkthrough

　　Let's walk through a complete trade to see how these prices affect a real position from start to finish.

　　We will use the GBP/JPY pair for this example.

Step 1: The Quote

　　We open our trading platform and look at the quote for GBP/JPY. The platform shows two prices.

• SELL (Bid): 191.43
• BUY (Ask): 191.45

　　The difference is 0.02, which is a 2-pip spread for this pair.

Step 2: Going Long

　　We think the price of GBP/JPY will rise. To profit from this, we need to open a "buy" order, also called going long.

　　We click the "BUY" button. This means we accept the broker's higher ask price. Our trade starts at 191.45.

　　Here's an important point: the moment our trade is live, it shows a small loss. This loss equals the spread. The market must move up by 2 pips just for our position to break even.

Step 3: Closing the Trade

　　Our guess was right, and the price of GBP/JPY has gone up. The new quote on our platform is:

• SELL (Bid): 191.80
• BUY (Ask): 191.82

　　To close our long position and take the profit, we must now sell. This happens at the current bid price. We click "SELL" and our position closes at 191.80.

Calculating the Result

　　Now, we can figure out how our trade did.

• Opening Price (Ask): 191.45
• Closing Price (Bid): 191.80

　　The calculation for our gross profit is: Closing Price - Opening Price.

　　191.80 - 191.45 = 0.35

　　This is a profit of 35 pips. We beat the initial 2-pip spread cost and caught a good market move. This example shows that you always buy at the higher price and sell at the lower price.

What Affects Spread Size？

　　Spreads are not fixed. They change from moment to moment. Understanding what makes spreads wider or narrower helps you decide when to trade and when to wait.

Key Spread Drivers

　　Several key factors affect the size of the bid-ask spread.

• 　　Liquidity: This is the most important factor. Major currency pairs like EUR/USD have lots of buyers and sellers, which keeps spreads tight. Less common pairs have fewer traders, which leads to wider spreads.

• 　　Market Volatility: During major news events, like job reports or interest rate decisions, uncertainty fills the market. Brokers widen their spreads to manage the risk of fast price changes.

• 　　Time of Day: The forex market runs 24 hours a day, but it's not always equally busy. Spreads are usually tightest when London and New York trading hours overlap. They tend to widen at the end of the New York session or during the quieter Asian session.

• 　　Broker Type: The broker's business model matters too. Some brokers may offer wider, fixed spreads. Others pass through the raw market spread and charge a separate fee per trade.

  　　

Spreads and Your Strategy

　　The bid-ask spread is not just a cost; it can determine if your trading strategy works at all. A strategy that makes money with a 0.5-pip spread might lose money with a 2-pip spread.

For Scalpers

　　Scalpers try to make very small profits, often just 5 to 10 pips, by trading quickly. For a scalper, the spread is the main hurdle.

　　If your goal is only 5 pips, a 1.5-pip spread takes away 30% of your potential gain before you even start. This makes very low spreads essential for this style of trading.

For Day Traders

　　Day traders hold positions for several hours but close them before the day ends. Their profit targets might be 20 to 50 pips.

　　While a 1.5-pip spread hurts less on a 40-pip target, it's still important. Since day traders may make multiple trades per day, these spread costs add up.

For Swing Traders

　　Swing traders hold trades for days, weeks, or even months. Their profit targets are much larger, often 100 pips or more.

　　For these traders, the initial spread cost is a much smaller part of their potential profit. A 2 or 3-pip spread on a trade aiming for 250 pips is less important.

Advanced Trading Concepts

　　Once you understand bid, ask, and spread well, you can learn about more complex ideas. These are things that every serious trader will eventually face.

Understanding Slippage

　　Slippage is the difference between the price you expect to get when you click "buy" or "sell" and the actual price you receive.

　　This happens because the market moves constantly. In the tiny time between your click and the order being processed, the price may change. During fast markets, this change can be big.

　　If you click to buy at an ask price of 1.2000 and your order fills at 1.2001, you've experienced one pip of negative slippage. While sometimes you might get a better price, traders should always be ready for negative slippage, especially during news events.

The Link to Liquidity

　　Slippage and wide spreads both come from the same problem: low liquidity.

　　When there are fewer buyers and sellers in the market, price can jump from one level to another without hitting the prices in between. This causes both wider spreads and a higher risk of your order filling at a different price.

Your Low Spread Action Plan

　　Keeping your trading costs low is key to long-term success. Finding a broker with good spreads is crucial. Here's how to do your research.

A 4-Step Checklist

• 　　Check the Broker's Website: Look at a broker's website for information about their spreads. Pay attention to the "Typical" or "Average" spread figures, not just the "As low as..." marketing claims.

• 　　Open a Demo Account: This is the best method. Open a demo account with any broker you're considering. This lets you see the real spreads on their platform. Watch the spreads during different market times—busy London hours, quiet Asian hours, and during major news.

• 　　Factor in Commissions: If you're comparing different account types, calculate the total cost. An account might show a tiny spread but charge a commission that makes the total cost higher.

• 　　Read Reviews Carefully: When reading what other traders say, look for specific comments about spreads. Are they consistently tight？ Do they widen too much during news？ Comments about execution speed are just as important as the advertised spread.

  　　

　　

Conclusion: Informed Trading

　　The bid and ask rate in forex is more than just a set of prices. It is the gateway through which all trading happens, and the spread is the fee you pay to enter.

　　By understanding these concepts, you move from being a market watcher to an informed trader who knows the real mechanics and costs of trading.

　　

Key Takeaways

• You always buy at the higher ask price and sell at the lower bid price.
• The difference between these prices is the spread, your main transaction cost.
• Spreads change based on liquidity, volatility, and the time of day.
• Your chosen trading strategy must work with the spread costs you will face.
• Always check a broker's real-world spreads with a demo account before using real money.

　　Mastering the bid and ask rate isn't about memorizing definitions. It's about managing your costs, improving your strategy, and taking a professional approach to the forex market.