Spread(Spread)You Should Know: Important Tips for Financial Trading

In the world of trading cryptocurrencies, stocks, and commodities, if you still do not understand basic concepts such as Spread, you might be missing out on profit opportunities and often unaware of how much your trading costs are increasing. This article will help you understand what a spread is and why it is important to your trading strategy.

What is a Spread and Why Is It Important?

Spread (Spread) or the difference is the difference between the selling price (Bid Price) and the buying price (Ask Price) of any asset, whether it’s currency, stocks, or commodities. This is the cost you pay just to enter a trading position.

For example, if the system shows EUR/USD at:

• Bid (selling price): 1.05672
• Ask (buying price): 1.05680

This difference (0.8 pips) is the spread, which is the income for the broker (Broker). If you buy and close immediately, you will lose this amount right away.

The spread also indicates market liquidity. A lively trading market (such as EUR/USD during normal hours) usually has a spread of only 0.001%. However, if the market has a spread of 1-2%, it indicates low liquidity and higher risk.

There Are 2 Types of Spreads: Which One Should You Choose?

All trading involves only 2 types of spreads:

1. Fixed Spread (Fixed Spread)

This is a spread set in advance by the broker and remains constant regardless of market conditions.

Advantages:

• You can calculate costs accurately
• Plan your trades with confidence

Disadvantages:

• Frequent Requotes occur; during volatile market conditions, the system will “block” your trade and ask you to accept a new price (which is usually worse)
• This can cause your trading plan to fail

2. Variable/Floating Spread (Variable/Floating Spread)

This spread changes constantly according to market conditions. The broker does not set the price but relays the actual market price.

Advantages:

• No Requotes
• Experienced and quick traders benefit (especially during high liquidity periods, costs are often lower)

Disadvantages:

• During major news events (such as NFP reports), spreads can spike from 2 pips to 20 pips in an instant
• Not suitable for scalpers and beginners because costs may be higher

Which is Better? The Answer Is Not a Single Letter

Between Fixed and Variable Spreads, there is no “best” choice because everything depends on:

** Small traders or those who need certainty?** → Fixed Spread is suitable for you

** Large traders who trade frequently, especially during peak market times?** → Variable Spread will be more advantageous

Want to avoid Requotes and trade quickly? → Variable Spread is a good option

Tips When Choosing a Platform

There is one important rule: The more volatile the spread, the harder it is to make a profit

Therefore:

• Choose a platform with stable spreads
• Trade popular currency pairs or stocks, such as EUR/USD, GBP/USD (spreads will be lower)
• Be cautious with less popular currency pairs or stocks (spreads can be very high)

Understanding spreads is fundamental to effective trading because trading is not gambling but a financial transaction that requires careful planning. Traders who deeply understand the system will have a higher chance of success than those who trade based on feelings.