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TRADING COSTS

How much does it Cost for a trader to make a Trade?

Traders do not take positions on currency pair at the exact rate at which the currencies are trading
Instead; they are offered two rates for the currency pair. The bid rate and the ask rate.

 The bid rate is the price at which traders can Sell the pair.
 The ask rate is the price at which traders can Buy the pair.

Below are some Examples of Currency Pairs:

The ask (BUY) rate is always higher than the bid (Sell) rate and the spread on the EUR/USD is 3pips,
meaning that if a trader Asks this pair, then the Bid rate of this pair will have to go 3 pips in order
for the trader to break even.

The difference between the bid rate and the ask rate is the spread. The spread is an automatic
adjustment that is made to the trader’s account when making the trade. Because of this spread,
traders will begin every position they assume with a small loss and will need to gain some profit in
order to break even.

For example, if a trader Asks into a position at the ask rate, and then immediately closes the
position at the bid rate, the trader will have a loss on their account that is equal to the spread.
These spreads are seen in every kind of market. However, it can be difficult to identify the spread
cost in the equities and futures markets due to the broker-based system they use.