What is a CFD spread?
The spread is the small gap between the buy and sell price — and one of the main costs of trading. Here's how it works and why tighter spreads matter.
The short version
- The spread is the gap between the buy (ask) and sell (bid) price.
- You start every trade slightly in the red by the size of the spread.
- The market must move in your favour by at least the spread to break even.
- Spreads can be fixed or variable; variable spreads widen during news and low liquidity.
- Tighter spreads lower your costs — compare brokers on realistic average spreads.
The spread is the most common cost in CFD trading, and you pay it on almost every trade. The good news: it's easy to understand once you see it.
Two prices, always
Open any market on a trading platform and you'll see two prices, not one:
- The bid (sell) price — slightly lower.
- The ask (buy) price — slightly higher.
The gap between them is the spread. If gold shows a sell price of 2,000.0 and a buy price of 2,000.5, the spread is 0.5.
Why the spread is a cost
When you open a trade, you enter at the less favourable side of the spread. Buy, and you pay the higher ask. The moment you're in, if you tried to close immediately you'd sell at the lower bid — so you start slightly in the red by the size of the spread.
In other words, the market has to move in your favour by at least the spread just for you to break even. That's why the spread is a genuine trading cost, even though it isn't labelled as a 'fee'.
A simple example
You buy a share CFD with a 10-cent spread, size 100 units.
- Your starting cost from the spread = 10 cents x 100 = 10 dollars.
- The price must rise 10 cents before you're at break-even.
- After that, every further move is profit.
Fixed vs variable spreads
- Fixed spreads stay the same regardless of market conditions. Predictable, but sometimes slightly wider on average.
- Variable (floating) spreads move with the market — very tight in calm, liquid conditions, but they can widen sharply during news events or low liquidity.
Most brokers use variable spreads. That's fine, but be aware spreads can balloon around major announcements, which is one reason to be careful trading right at news time.
What affects the size of a spread
- Liquidity. Heavily traded markets (like EUR/USD) have very tight spreads; niche markets are wider.
- Volatility. Spreads widen when markets move fast or news hits.
- Time of day. Spreads are usually tightest during a market's main trading hours.
- Account type. 'Raw' or ECN accounts show near-zero spreads but add a commission instead.
Why tighter spreads matter
The tighter the spread, the less the market has to move for you to profit. For active traders who place many trades, spread costs add up fast, so a broker with consistently tight spreads can make a real difference. When comparing brokers, look at the realistic average spread on the markets you'll actually trade — not the 'from 0.0 pips' marketing headline.
Research broker fees, regulation and account terms before you decide, so you can compare realistic average spreads side by side.
The bottom line
The spread is the gap between the buy and sell price, and you pay it on nearly every trade by starting slightly in the red. Tighter spreads mean lower costs, especially if you trade often. Compare brokers on their realistic average spreads, watch out for spreads widening around news, and remember that 'raw' accounts trade tiny spreads for a separate commission — which we cover next.
This is educational content, not investment advice. Markets carry risk. Always verify a broker's regulation before opening an account. BrokerBazaar is an independent comparison platform, not a regulator or advisor.
Common questions
Is the spread the only cost of trading?
No. Depending on the account you may also pay a commission, and holding overnight adds a swap charge. But the spread is the most universal cost, paid on nearly every trade.
Why did my spread suddenly get wider?
Variable spreads widen during volatility, major news events, market open/close, and periods of low liquidity. Trading right at news time often means paying a much wider spread.
What is a pip?
A pip is the standard small unit of price movement in forex, typically the fourth decimal place. Spreads on currency pairs are often quoted in pips, e.g. a 0.8-pip spread.
What is CFD commission?
Some CFD accounts charge a small fixed commission per trade instead of a wide spread. Here's how commission works and how to compare it against spread-only accounts.