In forex trading, the spread is the difference between the bid price (the price at which a buyer is willing to purchase a currency pair) and the asking price (the price at which a seller is willing to sell a currency pair). The spread is typically measured in pips, which is the smallest unit of price movement in a currency pair.
For example, if the bid price for the EUR/USD currency pair is 1.2000 and the asking price is 1.2005, the spread is 5 pips.
The spread is an important factor to consider when trading forex, as it represents the cost of trading. Traders pay the spread on every trade they make, regardless of whether they buy or sell a currency pair. This means that in order to make a profit, the price of the currency pair must move enough to cover the spread.
Forex brokers typically earn revenue from the spread, with some brokers offering fixed spreads and others offering variable spreads that can widen or narrow depending on market conditions. It is important for traders to choose a broker with competitive spreads that fit their trading style and strategy.