The spread is the difference between the bid price and the ask price. The spread is represented in terms of pips. For example, if the EUR/USD has a bid of 1.3346 and an ask of 1.3348, then the spread is 2 pips.
The spread is how forex brokers get paid. Traders end up paying the spread to brokers when they make a trade. When the spread widens – that is, when it increases as measured in pips – the broker makes more money off each trade. However, brokers still make money when the spread is tight because of the overall volume of trades being made. Sometimes a widening spread is merely the result of market conditions. However, if a trader continues to get bad fills of orders, it may mean that the broker is intentionally timing trades to maximize their profit.
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