What is the bid/ask spread, and how does it affect traders?
Quick answer
The bid is the price you can sell at and the ask is the price you can buy at; the spread is the difference. Every trade starts slightly negative by the spread, so wider spreads make every trade more expensive and loss limits closer. Traders compare spreads between firms carefully.
Detailed answer
Every quote has two prices. A buy order fills at the ask; a sell order fills at the bid. Closing a buy means selling at the bid, so a position opened and closed instantly loses exactly the spread.
A worked example
EUR/USD is quoted 1.08500 bid and 1.08510 ask, a spread of 1 pip. A trader buys 1 lot at 1.08510. If they closed immediately at the bid of 1.08500, the loss would be 1 pip, or $10 on a standard lot.
Why spreads matter more in a prop challenge
- Loss limits: high-frequency traders pay the spread many times a day, which brings the daily loss limit closer.
- Stops: a long position's stop triggers on the bid, so a widening spread can trigger it without the mid price reaching the level.
- Comparisons: traders check spreads against their own brokers.
When spreads widen
Spreads widen at the daily rollover, around major news and in thin markets. A good firm explains this in its FAQ, so traders understand why a stop triggered during a news spike.
Raw or marked up
Some setups widen the spread as hidden revenue or to make challenges harder. Traders notice. PropExecutor passes the feed's raw spread through to fills without a markup, so the spread a trader sees is the market's own.
PropExecutor team · Updated
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