Bid, ask and spread

A Forex quote normally contains two prices. The bid is the price available when selling the base currency, the ask is the price available when buying it, and the difference is the spread.

At an airport money counter, the price to sell your dollars is usually different from the price to buy dollars back. A quoted Forex pair also commonly has two prices at the same moment: a bid and an ask. The difference is one trading cost.

A five-pip spread costs more than a two-pip spread for the same position size, if everything else is equal. A low advertised spread does not tell you the full cost if commission, financing, conversion charges, or execution differences also apply.

A provider may charge an explicit commission, a conversion charge when settling into another currency, or a financing charge for holding a leveraged position. The relevant list depends on the product and provider. Ask what you would pay to enter and exit a hypothetical position and what could change before execution.

The bid is the price at which you can sell the base currency to a quoted provider, and the ask is the price at which you can buy it, subject to the size and quote actually available. If EUR/USD is 1.1000 bid and 1.1002 ask, a person buying one euro and immediately selling it back pays 1.1002 dollars and receives 1.1000 dollars. The 0.0002 difference is two conventional pips. For 10,000 base units, that immediate round-trip difference is US$2 before a separate commission, if the same quote remained available and fills occurred as displayed.

A “zero spread” advertisement can still have a commission or a variable spread at other times. Some providers quote different prices, minimum sizes or execution rules. Compare a complete, dated example: entry ask, exit bid, commission both ways, overnight financing if held, conversion charge, slippage and withdrawal fees. Do not add a quoted spread twice when your P&L calculation already uses the actual ask and bid.

Slippage is a difference between the price you expected and the price you actually receive. It can help or hurt, depending on direction and circumstances. A chart's last price may also be a bid, ask, or midpoint; the line alone does not tell you both executable sides.

Subtract the separately assumed US$2 commission and US$0.50 financing charge on paper to get US$7.50. The calculator does not promise those fees or that an order will fill at your entered prices. It also requires different entry and exit values, so use the nonzero round-trip example if you want to demonstrate a spread loss.

To model that loss, enter Long, EUR/USD, 0.1 lots, USD account, entry 1.1002, and exit 1.1000. The gross estimate is −US$2. That difference already represents the spread in this unchanged-quote illustration.

Break-even means the result is zero after the costs included in your calculation. Covering the opening spread alone may not be enough if commission, financing, or conversion charges also apply. State which charges you included; do not label a gross price result as a final net result.

The pip count need not be a whole number. A EUR/USD bid of 1.10000 and ask of 1.10008 differ by 0.00008, or 0.8 conventional pips. An extra display digit changes the precision of the quote; it does not change the conventional 0.0001 pip into 0.00001.

When comparing providers, use the same hypothetical size, pair, holding period, and transaction direction. A different minimum size or commission basis can make a headline comparison misleading. Write whether each charge is per side, per round trip, per lot, or per account action.

All rates, fees, position sizes, and calculator entries in this lesson are invented for learning. No example recommends a trade or predicts a future price.