Market foundations

The spread is a cost

The gap between bid and ask is paid before the market has done anything for you.

Lesson 2 of 4 • 10 min

A close view of a bid and an ask on a screen — Example. Bid 1.1000, ask 1.1002. Buy now and you start 2 pips behind. That is a small cost on a 40-pip study, and a large cost on a 3-pip study.

Study material only. It is not a signal to buy or sell. AcademyTrade is education. It is not a broker, not investment advice, and not a promise that you will make money. Trading can lose the money you deposit.

The spread is the distance between the bid and the ask. If the bid is 1.1000 and the ask is 1.1002, the spread is 2 pips on that quote. Cross it, and you start the trade slightly behind.

That gap is a real cost. It is paid on entry if you use a market order, and it can widen when news hits, when a session opens, or when fewer dealers are willing to quote. A strategy that looks profitable on a chart of last prices can fail once the spread is included.

Compare the spread with the move you are hoping for. A 2-pip spread is a small toll on a move of 40 pips. The same 2 pips is a large toll if you are trying to harvest 3 pips. This is arithmetic, not a recommendation to trade either way.

Check the spread at the time of day you actually trade, not at a quiet hour you will never use.
Write the spread down next to any practice result.
If the spread suddenly widens, the market is telling you that liquidity just got thinner.

AcademyTrade does not quote prices and does not take orders. Your broker's quote is the one that charges you.