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What is a Spread ?

A spread is the difference between BUY and SELL, or BID and ASK. In other words, this is the difference between the market maker's "selling" price (to its clients) and the price the market maker "buys" it from its clients.

If you buy a currency and immediately sell it (and thus there is no change in the rate of exchange), then you will lose money. The reason for this is “the spread”. 

At any given moment, the amount that will be received in the counter currency when selling a unit of base currency will be lower than the amount of counter currency which is needed to purchase a unit of base currency. 

For instance, the EUR/USD bid/ask currency rates at your bank may be 1.2015/1.3015, representing a spread of 1,000 pips (percentage in points; one pip = 0.0001).  Such a rate is much higher than the bid/ask currency rates that eToro charges which is 2 pips, in this example 1.2015/1.2017.

Smaller spreads are better for investors since this means you require a smaller movement in exchange rates in order to make profit from a trade.

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Trading in the Forex market can bring potential rewards, but can also be risky. You have to be aware of the risks and be willing to accept them in order to trade in the foreign exchange market.

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