There are 2 types of currency prices at Forex - Bid and Ask. The price we pay to buy the pair is called Ask. The price, at which we sell the pair, is called Bid.
Spread is the difference between these two prices. In other words, it is a commission you pay to your broker for every transaction.
SPREAD = ASK – BID
The following types of spreads are used in FBS:
- Fixed spread – the difference between ASK and BID prices doesn’t change regardless the Market conditions. This way you know in advance how much you will pay for a trade.
The other variation of fixed spread is zero spread - in this case the spread is not applied, the company takes specified commission for the order opening.
- Floating spread – the difference between ASK and BID prices fluctuates in correlation with Market conditions.
Floating spreads usually increase during the times of important economic news and during the bank holidays when the amount of liquidity in the Market declines. When the Market is calm they can be lower than the fixed ones.