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Forex Tip: What is the Bid-Ask Spread in Trading?

Trading involves tight margins. As such, it is important to know the spread of a trading pair. 

Understanding this is important because the spread is a factor of liquidity—the ease of converting from one currency to another.

What, then, is the 'spread'?

It is the difference between the ask (buying price) and the bid (selling price) of a currency pair. 

At any time, the broker will show the buy and sell price of a currency pair. The ask price would indicate the price at which you will buy the base currency, while the bid price indicates the price at which a trader is willing to sell the quote currency.

Ordinarily, when the spread is higher, the pair’s liquidity is always lower. Examples of high spreads and low liquidity would be market opening and closing, and during high impact news releases.


Keen to learn the forex market? Check out our other explainer articles in our Learn Forex blog. 


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