CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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ThinkMarkets > Support > FAQs > Trading FAQs > How are spreads calculated?
Trading FAQs
 General
 How are spreads calculated?
 How can I avoid slippage in forex?
 How much do you need to start trading forex?
 How to back test forex trading strategy?
 How to get more pips in forex trading?
 How to read forex chart patterns
 How to trade divergence in forex?
 How to trade forex with MetaTrader 4
 How to understand forex trading signals
 What are forex charts?
 What are Non-Farm Payrolls?
 What derivatives are used on forex markets?
 What is a candlestick in forex trading?
 What is a spread in forex?
 What is arbitrage in forex trading?
 What is bid and ask in forex?
 What is forex investment?
 What is free margin in forex?
 What is leverage in forex?
 What is margin in forex?
 What is market execution in forex?
 What time does the forex market close?
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How are spreads calculated?

In order to calculate the spread in forex, it’s quite simple.

Most quotes look like the following: 1.2115/1.2118, or something similar. This means that buyers are bidding for the currency pair at 1.2115, while sellers are asking for 1.2118.

Eventually, somebody jumps to one side of the trade or the other to fill that request. The spread in this case is 3 pips. By subtracting the bid from the ask, you can see that it gives you a difference of 0.0003, meaning 3 pips which is the basic unit of measurement in the forex market.

Note that sometimes the quote will have a fifth decimal, which is considered to be a 'pipette', which is 1/10 of a pip. In that case, the bid and ask might be 1.21151/1.21182, this would be a spread of 3.1 pips.

Depending on your timeframe, the spread may or may not matter. For example, if you are trading the weekly chart, then whether the spread is 3 pips, or 4 pips isn’t going to matter.

However, if you are trading a five-minute chart, that might make a bit of a difference. At this point, the spread may or may not be important, and will more than likely have minimal influence unless of course you are a scalper.

Luckily, the MetaTrader 4 platform gives you the ability to display the spread by right clicking on the ‘Market Watch’ window and selecting ‘spread’ from the submenu. This will be in the last column after the bid and the ask columns for each currency pair.

Have any questions?

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Risk warning for retail traders: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Risk warning for qualified professional traders:  Derivative products are leveraged products and can result in losses that exceed initial deposits. Please ensure you fully understand the risks associated with a professional trading account. Tax laws depend on individual circumstances and may differ in a jurisdiction other than the UK.
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