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NEXT ARTICLE Spreads

In forex-speak a spread is measured in pips and relates to the difference between the value of the bid and offer. For example, if the Pound Sterling against the US dollar is 1.7443/48, a trader is able to buy the Sterling at the offer price of 1.7448 and sell at the bid of 1.7443. The spread in this example is the difference between the bid and offer, and is five pips.

Most brokers will offer a narrow spread for the most liquid currency pairs – as low as a 2 pip spread for the AUD/USD, EUR/USD and EUR/GBP. In a game where every pip counts, these currency pairs are generally more popular with active or day traders. Less liquid currency pairs such as the USD/CAD (the CAD is the Canadian dollar) will generally incur a wider spread.