Spread is a key cost in trading, representing the difference between the buy price (ASK) and the sell price (BID) of a financial instrument. Essentially, the spread reflects the cost of entering the market, as a higher spread increases trading costs and reduces potential profits.
This is why traders carefully analyze broker spreads, considering them a crucial factor when choosing a trading platform.
Types of spread
There are two main types of spreads in trading:
🔹Fixed Spread – Typically offered by Market Maker brokers, where the spread remains constant regardless of market conditions.
🔹Floating (Variable) Spread – Common in Market Execution brokers, where spreads fluctuate based on market dynamics.
Within floating spreads, we can further classify them into:
🔹Minimum Spread – The lowest possible spread value, measured in pips.
🔹Typical Spread – The average spread under normal market conditions.
What affects spread?
Spreads are influenced by market conditions, particularly liquidity and volatility:
🔹 Liquidity – Higher liquidity leads to lower spreads. For example, major forex pairs like EUR/USD have tighter spreads due to high liquidity.
🔹 Volatility – Increased volatility results in wider spreads, especially during major economic events or low liquidity periods.
This is why spreads tend to widen during high-impact news releases, such as central bank announcements or geopolitical events.
Why trade with Eurotrader?
At Eurotrader, we offer tight and competitive spreads across a wide range of instruments, ensuring cost-effective trading conditions. Whether you’re a scalper looking for ultra-low spreads or a long-term trader needing stable pricing, our transparent spread structure provides the best trading environment.
For detailed spread information, check our Contract Specifications on the Eurotrader platform or contact our support team for assistance.
