What Is a Spread in Forex? How NXG Markets Keeps Your Costs Low

Every time you open a forex trade, you start slightly in the red.

Not because the market immediately moved against you. Not because you made a bad call. Simply because of something called the spread — a small but very real cost that sits between you and the price the market is actually trading at.

Most beginners spend months focused on strategy, charts, and indicators before they realise that the spread has been quietly eating into their results the entire time. In some cases — particularly for short-term traders placing dozens of trades a day — the spread is the single biggest factor determining whether they're profitable or not.

So let's talk about it properly. What the spread actually is, how it's calculated, what makes it wide or tight, and specifically why choosing a forex broker with low, transparent spreads — like NXG Markets — matters a great deal more than most new traders appreciate.

The spread is the difference between two prices you'll see on any forex platform: the bid price and the ask price.

The bid is the price at which your broker will buy the base currency from you — in other words, the price you get when you sell.

The ask is the price at which your broker will sell the base currency to you — the price you pay when you buy.

The gap between these two numbers is the spread. And it's measured in pips.

Here's a live example. Say EUR/USD is quoted like this:

The spread here is 0.3 pips. Tiny, right? But here's what that actually means in practice: the moment you open a buy trade on EUR/USD, you enter at 1.08453. The market needs to move 0.3 pips in your favour before your position even reaches break-even. Every pip of profit you ever make on that trade is measured after that 0.3 pip cost has already been subtracted.

Multiply that across 50 trades a month and suddenly 0.3 pips per trade is a number worth taking seriously.

Let's make it concrete with a straightforward calculation.

You open a position on EUR/USD:

The moment your trade opens, you're already down $10. That's the spread cost — the price of admission into the trade. The market has to move at least 1 pip in your favour before you break even. Any move beyond that is your profit.

Now imagine your broker charges a 3-pip spread on the same pair. You're starting $30 in the hole on every single trade. If your average trade targets 20 pips of profit, you're actually only netting 17 pips — a 15% reduction in your return on every winning trade, before you've even accounted for any other costs.

For long-term position traders holding trades for days or weeks, this matters less — a 3-pip cost is relatively small against a 200-pip target. But for scalpers and day traders who work with small targets and high frequency, spread is everything. A broker charging 3 pips where another charges 0.3 pips is not a minor difference — it's the difference between a profitable strategy and a losing one.

Not all spreads work the same way. There are two main types, and understanding both is important before you choose a forex broker.

Fixed spreads

A fixed spread stays constant regardless of market conditions. Whether the market is calm on a Tuesday afternoon or volatile during a Federal Reserve announcement, the spread stays the same.

Advantage: Predictability. You always know exactly what your trade will cost before you enter it. This makes fixed spreads popular with newer traders who want consistency while they're learning.

Disadvantage: Fixed spreads are typically slightly wider than the tightest variable spreads available during calm market conditions. You pay a small premium for the certainty.

Variable spreads (floating spreads)

A variable spread moves in real time based on market liquidity. When the market is deep and active — like during the London–New York session overlap — variable spreads can be extremely tight, sometimes as low as 0.1 pips on major pairs. When liquidity thins out — like during the Asian session on a quiet Friday afternoon, or during a major economic announcement — spreads can widen significantly and fast.

Advantage: During normal conditions, variable spreads are often considerably tighter than fixed alternatives. For high-frequency traders, this adds up to meaningful savings over time.

Disadvantage: During news events, spreads can spike to multiples of their normal level within seconds. A trader caught in a position during a surprise central bank decision might find their spread temporarily blowing out to 10, 15, or even 20 pips. This is not a failure of the broker — it reflects the reality of interbank liquidity drying up during moments of uncertainty.

Most professional and intermediate traders operate with variable spreads on major pairs where liquidity is deep, and accept the predictability trade-off on more exotic pairs.

Spreads are not set arbitrarily. They reflect the underlying liquidity available in the interbank market at any given moment. Several factors push spreads wider:

Low liquidity periods. When fewer participants are active — late Friday sessions, public holidays in major financial centres, the first hour after Sydney opens — there are fewer buyers and sellers competing to fill trades. Less competition means wider spreads.

Major economic releases. In the minutes before and after a high-impact event — a central bank rate decision, the US Non-Farm Payrolls report, a surprise geopolitical development — liquidity temporarily evaporates as institutional traders pull their orders off the book and wait for the dust to settle. Spreads widen dramatically during these windows.

Exotic and minor pairs. Because fewer participants trade USD/TRY or USD/ZAR compared to EUR/USD, spreads on exotic pairs are structurally wider. There simply isn't enough competing liquidity to compress them.

After-hours trading. The forex market runs 24 hours, but genuine liquidity concentrates around specific sessions. Trading major pairs outside their primary session windows will almost always result in wider spreads than trading them during peak hours.

Understanding these dynamics lets you make smarter decisions about when to enter trades — not just where.

Here's something a lot of broker comparison guides gloss over. There are two common pricing models in the forex industry, and comparing spreads between them without accounting for the full cost gives you a misleading picture.

Spread-only model: The broker makes their revenue entirely through the spread. No separate commission is charged per trade. What you see in the spread is your total cost.

Raw spread + commission model (ECN/STP): The broker offers extremely tight spreads — sometimes as low as 0.0 pips — but charges a fixed commission per lot traded. Typically this is somewhere between $3 and $7 per standard lot, per side.

Neither model is inherently better.

What matters is the total effective cost per trade.

Example: a spread-only broker quoting 1.2 pips on EUR/USD versus a commission broker quoting 0.2 pips + $7 round-turn commission. At one standard lot, the spread-only trade costs $12. The commission trade costs $2 (spread) + $7 (commission) = $9. The commission model wins. At a mini lot (0.1 lots), the commission trade costs $0.20 + $0.70 = $0.90. The spread-only trade costs $1.20. Still the commission model, but the gap is smaller.

Always calculate total cost per lot rather than comparing spread numbers in isolation.

This is where the choice of forex broker stops being theoretical and starts being practical.

NXG Markets operates with a transparent pricing structure across all account types, with competitive spreads on major currency pairs that keep your cost-per-trade genuinely low — not as a promotional claim, but as an observable, verifiable reality you can check on the platform before you commit a single dollar.

A few specific things that make the difference:

Real-time spread display. Before you enter any trade on the NXG Markets platform, the current spread is visible. There are no hidden markups applied after execution. What you see is what you pay.

Deep liquidity sourcing. NXG Markets connects to institutional-grade liquidity providers, which means the raw spreads passing through from the interbank market are tight — and that tightness flows through to you rather than being absorbed as additional broker margin.

Account types built around trader needs. Whether you're a beginner working with small position sizes or an active trader placing high volume, NXG Markets structures its account offerings so the pricing model matches your trading style — not the other way around.

No requotes. A requote happens when the broker can't fill your order at the price you requested and offers a different price instead. It's a hidden cost that doesn't show up in the spread but absolutely shows up in your results. NXG Markets' execution model is built to eliminate these.

As a trusted broker, NXG Markets understands that low trading costs aren't just a marketing angle — they're a genuine competitive advantage for the trader sitting on the other side of the screen. Every pip you save on spread is a pip that stays in your account.

Before entering any trade, experienced traders run through a quick mental checklist around spread:

If any of those answers give you pause, the right move is to wait. The market will still be there in an hour. A trade entered with a 10-pip spread during a news spike will need a much larger move in your favour just to reach break-even. Patience on execution is underrated as a trading skill.

The spread is not the most exciting topic in forex education. It doesn't have the drama of leverage or the visual appeal of a candlestick pattern. But it might be the most consistently underestimated factor in whether a retail trader stays profitable over time.

Pay attention to it. Compare it across brokers. Calculate it as a real cost rather than a small footnote. And choose a forex broker — like NXG Markets — that treats transparent, competitive pricing as a standard, not a selling point.

Because every single pip you don't pay in spread is a pip working for you instead.

Q. What is a spread in forex trading?

The spread is the difference between the bid price (the price at which you sell) and the ask price (the price at which you buy) on a currency pair. It is measured in pips and represents the primary cost of entering a forex trade. A spread of 1 pip on a standard lot of EUR/USD equates to approximately $10 in cost per trade.

Q. Why do forex spreads change throughout the day?

Spreads change because they reflect the live liquidity available in the interbank market. When many institutional participants are active — during the London or New York sessions — there is more competing liquidity, which compresses spreads. During low-volume periods or major news events, liquidity thins and spreads widen to reflect the increased uncertainty and reduced market depth.

Q. What is a good spread for EUR/USD?

During normal market conditions in peak trading hours, a competitive spread on EUR/USD with a reputable forex broker typically ranges from 0.1 to 1.5 pips depending on the pricing model. Anything above 2 pips on EUR/USD during the London session would generally be considered uncompetitive for a major pair. NXG Markets offers spreads that sit well within the competitive range for major pairs.

Q. Is a fixed or variable spread better for beginners?

Fixed spreads offer predictability, which can help beginners budget their trade costs accurately while they're learning. Variable spreads can be tighter during favourable conditions but require the trader to be aware of spread widening during news events and low-liquidity periods. Most experienced traders transition to variable spreads as their market awareness develops.

Q. How does NXG Markets keep spreads competitive?

NXG Markets sources liquidity from institutional-grade liquidity providers, which allows tight interbank spreads to pass directly to retail traders with minimal markup. The platform displays live spreads transparently before trade execution, with no hidden costs or requotes applied after the fact. This structure makes NXG Markets a genuinely low-cost environment for active forex trading across all major pairs.