Forex Spread explained

Here's how Forex Spread works on your trades.

We'll use the forex quote and chart above to explain forex spread.

Currently USD/CAD is trading at 1.0300, represented by the horizontal blue line. This is also the price you can sell the currency pair, see forex quote. Current spread for this pair is $3.0, add this to current price (sell price) of the currency pair you will come up with the buy price 1.0303 (1.0300 plus .0003).

How the spread work.

If you buy USD/CAD, you will need to buy it at the buy price, 1.0303, once bought you are already at a loss of $3.0 (spread), why? Because if you close your trade (sell), you will be done at 1.0300 (sell price). 1.0303 buy price less 1.0300 sell price equals loss of .0003 or $3.0.

How will it work if you short the pair rather than going long?
If you sell USD/CAD, you will be done at 1.0300 (sell price), once sold you are already at a loss of $3.0 (spread), why? Because if you close your trade (buy), you will be done at 1.0303 (buy price).

Are you being charge with the spread every time you buy & sell a pair? Yes, but if you buy and CLOSE your trade you are only charge when you buy, if you sell and CLOSE your trade you are only charge when you sell.

In summary you are only charge by the spread when you enter a trade, long or short (buy or sell), and not when you close your trade.

Hope this help, Kindly leave your comment if you have further question.