What is Forex Spread?
The difference between the purchase price (ask) and the selling price (bid) of currency pairs / parities (the ratio of currencies) is called spread. The difference between buy-sell prices is measured in pips. Pip is the change on a piece of paper, and most parts represent the 4th step change (1 pip = 0,0001).
There may be differences between the brokerage houses offering brokerage services in Forex markets and products from the market. Spreadler may show intraday variability depending on the liquidity in the market. These spreads, which are called dynamic spreads (spreads), may narrow at times when liquidity is high and may expand at times when liquidity is low. Some brokerage houses also have a fixed spread application. Brokerage houses usually do not get commission on Forex market transactions, and the income they earn is within these spread rates.
WHY SPREAD RATE? How is SPREAD TRANSITIONAL?
Forex spread ratios are not fixed because they are based on prices given by large banks and may decrease or increase according to market conditions.
For example; In the EURUSD parity, the selling price is 1,1356 and the selling price is 1,1354, the spread will be 2 pips. Assume that you open a position in the buying direction at a price of 1,1356 in the EURUSD size of 1 lot (position size 100,000 EURO = 113,560 USD). When you open the position, the selling price will be 1,1354 due to the 2 pip spread in between and will appear as * 100,000 = -20 USD in the profit / loss column (1,1354-1,1356). That is, the position will start to run out of proportion to the spread rate. When the selling price rises to 1,1356, your position will be at the beginning and the profit / loss situation will be 0 (zero).