reference · Order execution
Bid–Ask Spread: Price, Pips and the Cost of Crossing
The bid–ask spread is the ask price minus the bid price for the same instrument at the same time. Buying at the ask and immediately selling at an unchanged bid loses one spread before other charges.
Key points
- Keep the quote timestamp and instrument identical when measuring a spread.
- Convert price distance into money using the actual position size and contract convention.
- Actual entry-to-exit P&L already reflects the prices paid; do not deduct an estimated spread twice.
Scope and assumptions
- The worked FX example uses an unchanged quote, a USD account, linear pricing and no commission, financing or extra slippage.
Read both sides of the same quote
A quote of 1.1000 bid and 1.1002 ask means the displayed selling price is lower than the displayed buying price. The difference is 0.0002 quote-currency units per base-currency unit. If this instrument uses a 0.0001 pip, the spread is two pips. The last traded price is a separate observation; it does not replace either side of the quote. Investor.gov describes the bid and ask sides used by market orders.
The minimum record for a useful comparison is symbol, venue or broker, timestamp, bid, ask and displayed size. Comparing yesterday's tightest spread on one account with today's live quote on another does not establish which execution was cheaper. Neither does comparing two instruments that happen to share a short symbol name.
Turn a spread into a money amount
Suppose an educational EUR/USD position contains 25,000 euros. The price is quoted in US dollars per euro, and both transactions use the unchanged prices above:
| Step | Calculation | USD amount |
|---|---|---|
| Buy 25,000 EUR | 25,000 × 1.1002 | 27,505 paid |
| Sell 25,000 EUR | 25,000 × 1.1000 | 27,500 received |
| Price difference | 25,000 × 0.0002 | −5 |
The same calculation is two pips multiplied by $2.50 per pip. Relative to the midpoint of 1.1001, the entry is $2.50 above the midpoint and the exit is $2.50 below it. These are two views of the same $5 difference, not three separate costs.
If the account is denominated in another currency, convert the resulting USD amount using the applicable conversion convention. Futures and CFDs require their own multipliers; multiplying every spread by a standard FX lot size would produce incorrect results. Start with pips, points and ticks when the quote's units are unclear.
Separate spread, commission and slippage
Spread measures the difference between simultaneous quotes. Commission is a separate charge. Slippage compares an actual fill with a specified reference price at a specified time. A larger order can receive several fill prices even when the best visible spread is small; the order-book example explains that distinction.
When reconciling a completed trade, calculate P&L from actual entry and exit fills, then include charges according to how the account statement records them. Subtracting the opening spread again can understate the result. In a simulation built from midpoint prices, by contrast, an explicit cost model may be necessary because those midpoint prices were never executable quotes.
A practical quote check
Record both sides when an instruction is generated and again when each account fills. Confirm whether the chart shows bid, ask, midpoint or last trades. Then compare identical quantities or normalize to a money amount per unit. A difference in fills can come from a moving quote, available depth, order rules or timing; the spread alone cannot identify which one occurred. Broker conditions also vary, as Spotware's trading-conditions documentation explains.
Use the result to diagnose costs, not to infer future returns. A narrow displayed spread says nothing by itself about how reliably a particular quantity will execute.
Questions and answers
Is the spread charged twice on a round trip?
An immediate purchase at the ask followed by a sale at the unchanged bid loses one full spread. Relative to the midpoint, each side accounts for half that spread in a symmetric quote. A later exit can have a different spread and market price.
Does a zero-commission account have no trading costs?
No. The bid–ask spread, financing and other account charges can still affect the result. Compare actual executable quotes and the broker's complete fee schedule.
Why does a new trade show a small loss immediately?
One possible reason is that the entry executes on one side of the quote while the position is marked using the opposite closing side. The spread, posted charges and any market movement should be reconciled separately.
Sources and further checks
Use the current source for your exact instrument, account and platform. Referencing a general specification does not establish support for every TradeCopier workflow.
- MetaQuotes: Symbol Properties · Checked September 19, 2026
- Investor.gov: Types of Orders · Checked September 19, 2026
- Spotware: Trading Conditions · Checked September 19, 2026
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