The spread is a cost
The difference between the bid and the ask is a cost paid the moment a position is opened. Even if the price does not move at all, a new position starts out at a loss equal to the spread. That is why, for short and frequent trades, the spread can be a significant part of the total cost.
Why the spread changes
The spread is not fixed; it widens or narrows with the product's liquidity and market conditions. It usually widens when liquidity thins out, such as around major data releases, at session changes and at the weekly open. The spread shown on the platform reflects the conditions at that moment.
Swap: the cost of holding overnight
Positions that stay open past the end of the trading day are charged or credited an overnight financing amount called swap. Swap is calculated from factors such as the interest rate difference between the currencies involved and financing conditions, and it can be positive or negative. For positions held for days or weeks, swap can noticeably change the result.
Other costs
Some products and accounts charge a commission per trade on top of the spread. An order being filled at a different price from the one when it was placed, known as slippage, is an indirect cost. Fees charged by third parties such as banks when you deposit or withdraw are part of the total cost too.
Making costs visible
Recording the cost of each trade separately from its result shows what share of the overall result costs take. Product information sets out the spread, swap and commission terms. Reading these terms before using a product for the first time reduces surprises.
Example: the cost of the spread
Hypothetically, if the bid is 1.1000 and the ask is 1.1002, the spread is 2 pips. On a 0.1 lot EUR/USD position one pip is worth 1 US dollar, so the position starts with a cost of about 2 US dollars the moment it opens. The numbers are for illustration only; the real spread changes with market conditions.
Costs can turn a result into a loss even when the price moves in your favour. Trading leveraged products carries a high level of risk, and you can lose all of the money you deposit.
Read the risk disclosure