What is Spread?

When Traders want to open a trade, there are 2 different prices of an asset: The Buy price, and the Sell price. The difference between them is called the spread.If the spread is low, the cost of trading will be low also, and vice versa. Therefore, the wider the spread, the more difficult it will be to profit from the position.

So, who decides what the spread will be?

At CFDXP, the Sell and Buy prices are real market prices, and you the traders, do not have to pay any commissions or other fees in order to trade the market’s prices.

However, there are couple of factors that can change the size of the spread.

The first is volatility; because the financial market changes in a blink of an eye, events such as news releases, announcements, and even press releases can cause shifts in price movements, so the spread can move either way because of it.

The second is liquidity; it basically means that the more buyers and sellers in the market, the tighter the spread will be.

However, if there are not a lot of traders who are interested in this asset, the spread will go wider.   Moreover, liquidity and time of the day go hand in hand together.

If you open a position and trade during the busiest work hours, it is likely the spread will be tight, and as a trader, you can benefit from this. But, if you are trading after markets hours, the spread will usually be wider.

Therefore, when trading, choose trades on assets that have tighter spreads, to reduce your risk and increase your chance of profit.