The spread in forex is simply the difference between the bid price and the ask price for a given currency pair. The “ask” price is the rate (or, counter-currency price) at which you purchase the base currency in a forex currency pair. The “bid” price, on the other hand, is the rate at which you sell the base currency in a forex pair. Let’s look at a hypothetical example. If the EUR/USD exchange rate is 1.1234 for the ask price and 1.1232 for the bid price, that means the spread is two pips. (1.1234 - 1.1232 = 0.0002, or two pips). Important note about spreads: Though many brokers may advertise “zero spreads” or “zero minimum spreads,” the best way to get a reasonable sense of a broker’s spread-based fees is to calculate the average spread. When rating brokers based on their Commissions & Fees, for example, I always calculate each broker’s average spread by taking all monthly price updates (tick data for the bid/ask prices) and computing the average price.