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A good spread in forex is a tight difference between the bid and ask prices, usually around 1–3 pips on major currency pairs like EUR/USD, USD/JPY, and GBP/USD. Lower spreads mean lower trading costs and better profitability ideal for scalpers and active traders, while wider spreads (5+ pips), common with minor and exotic pairs, increase trade costs.
If you’re serious about forex trading, spreads aren’t just a detail they’re one of your biggest trading costs. This complete guide explains what spreads are, how to measure them in MetaTrader 4 (MT4) and MetaTrader 5 (MT5), what counts as a good spread, and how to make smarter trading decisions with a ready‑to‑use checklist and mini calculator.
What Is a Spread in Forex?
In forex, the spread is the difference between the buy (ask) and sell (bid) price of a currency pair. It represents the transaction cost built into every trade, even if your broker doesn’t charge a separate commission.
Spread Formula:
Spread (in pips) = (Ask Price − Bid Price) / pip size
pip size = 0.0001 in most pairs
pip size = 0.01 in JPY pairs
For example:
Ask: 1.0635
Bid: 1.0630
Spread = 0.0005 → 5 pips
Why Spreads Matter in Forex Trading
| Reason | Why It Matters |
|---|---|
| Cost of Trading | Spread is part of your cost, lower spreads save money. |
| Liquidity Indicator | Tighter spreads usually mean higher liquidity. |
| Strategy Impact | Scalpers and intraday traders prefer tight spreads. |
| Volatility Sensitivity | Spreads widen during news and low‑liquidity sessions. |
Typical Spread Ranges by Currency Pair
| Currency Pair Category | Typical Spread Range | Cost Impact |
|---|---|---|
| Major Pairs (e.g., EUR/USD, USD/JPY) | 0.1–3 pips | Low — Good |
| Minor Pairs (e.g., EUR/GBP) | 2–6+ pips | Moderate |
| Exotic Pairs (e.g., USD/TRY) | 10+ pips | High — Expensive |
A “good” spread is typically 1–3 pips on major pairs. Wider spreads mean more cost and lower theoretical profitability.
Why Spreads Widen
Spreads in forex trading are dynamic. They don’t remain fixed, and one of the most overlooked causes of poor trade execution is entering the market during times when spreads naturally widen. Let’s explore the three most common and impactful moments when this happens and why understanding them gives you a real edge.
During major economic news releases
When key economic indicators are released such as Non-Farm Payrolls (NFP), inflation reports (CPI), central bank rate decisions, or employment data the market reacts instantly. These events trigger a surge in trading activity and price movement, but they also introduce intense short-term uncertainty.
Liquidity providers, unsure of where the market might head next, pull back or widen their price quotes. Brokers reflect this by increasing spreads to protect themselves against the risk of sudden price gaps or slippage.
Even if you’re not trading the affected currency directly, correlated pairs can also see wider spreads. That’s why many seasoned traders either avoid trading during high-impact news or use strategies designed for those volatile moments.
At rollover time (5 PM New York)
Rollover, also known as swap time, occurs at 5 PM EST. It’s the official close of one trading day and the opening of the next on most broker platforms. At this moment, banks and institutions update their positions, and brokers apply rollover interest charges or credits based on your open trades.
This is one of the quietest periods in the forex market, and liquidity drops significantly for a brief window — often just a few minutes. Because of this low participation, spreads can widen substantially. If you’re using tight stop-losses or placing entries around this time, you could be stopped out or suffer unnecessary slippage.
Avoid placing market orders between 4:59 PM and 5:05 PM EST unless absolutely necessary, especially if your strategy is short-term or sensitive to spread cost.
During low liquidity sessions: Asia open and late Fridays
The forex market is a 24-hour market, but not all hours are created equal. The opening of the Asian session (around 6 PM EST) and late Friday trading are notoriously quiet times. Here’s why:
- At the Asia open, most major financial centers in Europe and North America are offline. Liquidity is concentrated in Asia-Pacific currencies like AUD, NZD, and JPY, while others see thin order books. Brokers widen spreads to reflect the lack of counterparties and price certainty.
- On late Fridays, traders begin closing positions ahead of the weekend to avoid gaps caused by geopolitical events, unscheduled news, or macro developments. As a result, trading volume drops, and spreads often widen significantly after the London close.
These moments can also lead to unpredictable price movements with lower conviction. If your trading system relies on precision entries or small profit margins, it’s best to avoid execution during these windows.
Final thoughts on widening spreads
Timing matters as much as strategy in forex. By knowing when spreads typically widen, you protect yourself from unnecessary losses and maintain better control over your trade entries and exits. Many beginners get caught off-guard by these spread surges, mistaking them for broker manipulation or market noise. In reality, it’s a natural function of supply and demand reacting to changing conditions in global financial markets.
How to See Spreads in MT4 & MT5
1. Market Watch Window
- Open Market Watch (Ctrl+M).
- Right‑click → Columns.
- Enable Spread to see real‑time spreads next to each pair.
2. On‑Chart Spread Indicator
You can add a spread indicator to display the bid–ask difference directly on your chart, which helps monitor costs in real time.
3. Using Tick Values
In MT4/MT5:
- Spread is often displayed in pips or pipettes (1 pip = 10 pipettes).
- Example: If EUR/USD spread shows 20 pipettes → that’s 2.0 pips.
Mini Spread Cost Calculator
You can estimate the cost of spread for a trade:
Spread Cost = Spread × Lot Size × Pip Value
Where:
- Spread = difference in pips
- Lot Size = units traded (standard = 100,000)
- Pip Value ≈ $10 per pip per standard lot
Example:
EUR/USD spread = 2 pips
Lot size = 1 standard = 100,000
Cost = 2 × $10 = $20 per trade
Featured Spread Comparison Table
| Currency Pair | Good Spread Range | Why It Matters |
|---|---|---|
| EUR/USD | 0.1–2 pips | Very liquid major benchmark pair |
| USD/JPY | 0.1–3 pips | High liquidity, low cost. |
| GBP/USD | 0.2–4 pips | Slightly wider due to volatility. |
| EUR/GBP | 2–6+ pips | Minor pair, wider spreads common. |
| USD/TRY | 10+ pips | Exotic, costly and volatile. |
People Also Ask
Q: What’s the lowest spread you can find in forex?
Some brokers offer raw spreads as low as 0.0–0.3 pips on major pairs during high‑liquidity sessions, especially on ECN or raw spread accounts.
Q: Do spreads stay the same all the time?
No, spreads vary based on market liquidity, volatility, news, and session times.
Q: Are fixed spreads better than variable spreads?
- Fixed spreads are predictable, but sometimes slightly higher.
- Variable spreads can be lower but widen during news and volatile times.
Q: Do all brokers use spreads only?
Some brokers charge spreads plus commissions, especially on raw spread accounts. It’s essential to check total cost.
Checklist Before You Trade
✔ Check current spread on your platform
✔ Trade during high liquidity sessions (London–NY overlap)
✔ Avoid major news times — spreads widen
✔ Compare brokers on typical average spread
✔ Know if your account has commission + spread or just spread
So What Is a Good Spread?
A good spread in forex trading is tight and consistent typically 1–3 pips on major pairs like EUR/USD, GBP/USD, and USD/JPY. Lower spreads mean lower trading costs and better profitability, especially for shorter‑term strategies. Always monitor spreads in MT4/MT5 and be mindful of market conditions before entering trades.
