What is the foreign exchange spread

Spread is essentially the difference between the buying price and the selling price. Because traders tend to trade one currency in another currency, foreign exchange currencies are often quoted based on the current price compared with another currency. In order to achieve convenience, these currencies are written in the form of matching, such as AUD/USD (AUD/USD-where AUD is the “base currency” and the U.S. dollar is called the “counter currency”.)

For example, from the chart, the exchange rate of Euro to U.S. dollar is 1.4502, and the exchange rate of U.S. dollar to Euro is 1.4505. The spread of this pair of currency pairs is 0.0003.
What is the foreign exchange spread

The spread situation of the foreign exchange platform is different

At present, the quotation spread for inter-bank transactions is 2-3 points; the quotation spreads offered by banks (or dealers) to customers according to their own circumstances are quite different, or even several times different, mainly due to the degree of regional foreign exchange business development , The difference between the transaction process and other aspects.

At present, the quotation spreads of foreign formal margin dealers are around 5 points, Hong Kong is around 6-8 points, and domestic banks’ real transactions range from 5-40 points (large trading volume will be a bit bad).

A little bit lower is better

The larger the spread, the higher the seller’s price and the lower the buyer’s price. Therefore, when you buy, you need to pay more, and when you sell, the less you get, making profitability difficult.

How to calculate foreign exchange spreads

The foreign exchange price is quoted by the liquidity bank, and it will quote two prices at the same time: the buying price and the selling price. The difference between these two prices is the transaction cost, that is, the spread. How to calculate the foreign exchange spread? For example, if the buying price of EURUSD is 1.2256 and the selling price is 1.2253, then the spread is 3 points, and the profit earned by foreign exchange traders is 3 points. Of course, the spreads of foreign exchange products and their platforms are different.

The spread is the bid-ask spread. For example, the buying price of EURUSD is 1.2256 and the selling price is 1.2253. This is the so-called 3-point spread. Of course, the spreads of each variety are not exactly the same, and the various platforms are not exactly the same. At present, it is basically that the euro and the dollar are relatively low, and then the pound and the dollar are relatively high, and the highest is the variety of cross trading.

Quotation spread: In foreign exchange transactions, there is a difference between the buying price and the selling price. For example, when the US dollar yen (USDJPY) is quoted at 120.00/120.10, 120.00 is the selling dollar price, 120.10 is the buying dollar price, and 120.10-120.00 =0.10 is called a spread of 10 points. When GBPJPY quotes 185.50/185.60, the spread is 10 points.

Spread of handling fee: Convert the handling fee charged for each transaction into a spread. Regardless of the currency of the transaction, the transaction fee is converted into the spread of the currency