| The Spread refers to the difference between the sell and buy price for a security. |
For example, if the bid is 1.2635 and ask price is 1.2638, the Bid Ask Spread - the difference between the two - is 3 pips.
Often referred to at the Bid Offer Spread, this is the amount the buy price (ask or offer price) exceeds the sell price (bid).
Source of the Bid Ask Spread
Every market has a spread. Whether Foreign Exchange, equities, futures or your local boutique, the market maker will practically always charge a higher price than the price paid.
The size of the spread is primarily due to liquidity and transparency in the market. More buyers and sellers competing in the same space bring Bid/Offer spreads lower. When all participants have access to the same price information at the same time, few are able to get away with wider spreads.
Since Foreign Exchange is the world's biggest and most liquid market and as technology has given anyone with access to a computer and the internet real-time pricing information - spreads in fx extremely low, just factions a cent.
