What is a spread?
The spread is the difference between the price you buy at (the ask) and the price you sell at (the bid). When you open a trade, you immediately start at a small loss equal to the spread — you need the price to move at least the spread distance in your favour before you break even.
EUR/USD bid: 1.08500 / ask: 1.08510. The spread is 1.0 pip (10 pipettes). If you buy one standard lot of EUR/USD, you pay 1.0 pip x $10 = $10 to enter.
Fixed vs variable vs raw spreads
| Type | How it works | When it widens | Best for |
|---|---|---|---|
| Fixed | Spread is guaranteed constant (e.g., 2.0 pip on EUR/USD always) | Never (but typically wider than variable in normal conditions) | Traders who need predictable costs; rare on modern platforms |
| Variable | Spread fluctuates with market liquidity | During news events, low-liquidity hours, and weekends | Most retail brokers |
| Raw + commission | Near-zero spread (0.0–0.3 pip) + flat commission per lot | Minimal widening even during news | ECN/STP brokers (Pepperstone Razor, OANDA Core, Tickmill Pro) |
The “zero commission” trick — explained
A broker advertising “zero commission” makes its money entirely on the spread markup. The broker buys your execution from a liquidity provider at, say, 0.1 pip and charges you 1.0 pip — keeping the 0.9 pip difference. This is the spread markup.
At $100,000 monthly trading volume on EUR/USD:
- eToro (1.0 pip spread, “zero commission”): $100–$180/month in spread costs
- Pepperstone Razor (0.09 pip avg + $7/lot commission): approximately $15–$25/month
The “zero commission” broker charges 6–8x more for the same execution volume. This is not illegal or even unethical — it is disclosed in the product documentation — but it is widely misunderstood by beginner traders.
How to compare spreads across brokers
Always convert to an “all-in” cost per lot:
- Take the typical spread in pips
- Multiply by $10 (for a standard lot on most major pairs)
- Add commission if any
A broker advertising “0.0 pip spread from” should have the commission added to that before you compare it with a spread-only broker.
See also: Pip · ECN/STP vs Market Maker · Lot
Used in: eToro review · Pepperstone review · eToro vs OANDA comparison