Spreads Are The Biggest Hidden Trading Cost, PrimeXBT Cuts Them
1h ago|4 min readStandard
Fazen Markets Editorial Desk
Collective editorial team · methodology
bid-ask-spreadforex-trading-costs
Fazen Markets Editorial Desk
Collective editorial team · methodology
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The bid-ask spread remains the most significant yet frequently unexamined cost for traders, directly impacting profitability on every single transaction. This built-in fee, representing the difference between the buying and selling price of an asset, compounds with trade frequency. Industry analysis from InvestingLive on June 23, 2026, illustrates that a typical EUR/USD spread of 2 pips can amount to a substantial annual cost for active portfolios. PrimeXBT and similar platforms are now competing aggressively on spread width to lower this primary execution expense for institutional and retail clients.
Spreads have gained prominence as commission-free trading becomes standard across many brokerages. The cost structure of trading has shifted from explicit fees to implicit costs embedded in execution prices. Higher market volatility, such as the periods following major central bank announcements, typically causes spreads to widen significantly as liquidity providers hedge their risk.
The adoption of zero-commission models by major retail brokers around 2019 accelerated this focus on non-commission revenue streams. Spreads, along with payment for order flow, became the primary mechanisms for broker compensation. Current macroeconomic conditions, with interest rates remaining elevated, have increased the cost of capital for market makers, creating upward pressure on spreads across less liquid instruments.
A spread is quantified in pips, the smallest price move a currency pair can make. For EUR/USD, a 2-pip spread on a standard 100,000-unit lot equates to a $20 cost before any price movement. This cost is immediate and unavoidable upon trade entry. Major forex pairs like EUR/USD and GBP/USD typically exhibit the tightest spreads, often between 1-3 pips during active trading hours.
| Instrument | Typical Spread (Pips) | Cost per Standard Lot |
|---|---|---|
| EUR/USD | 1.5 - 2.5 | $15 - $25 |
| GBP/USD | 2.0 - 3.0 | $20 - $30 |
| USD/JPY | 1.0 - 2.0 | $10 - $20 |
Exotic pairs and cross-rates demonstrate much wider spreads, frequently exceeding 10-15 pips due to lower trading volumes. The SPDR S&P 500 ETF (SPY) exhibits an average bid-ask spread of 0.01%, or approximately $0.04 per share. For a 100-share trade, this represents a $4 execution cost. PrimeXBT advertises spreads as low as 0.0 pips on major forex pairs for high-volume traders, undercutting the industry average by a significant margin.
Tighter spreads directly benefit high-frequency traders and scalpers whose strategies rely on small, frequent price movements. For a day trader executing 20 trades daily, a 1-pip reduction in average spread can save thousands of dollars monthly. Brokerages competing on spread width attract this valuable client segment, increasing their order flow and market share.
The counter-argument suggests that extremely tight spreads may be subsidized by wider spreads on less liquid instruments or other hidden fees. Some platforms offering zero spreads compensate through larger commissions or financing charges on leveraged positions. Retail investors with longer time horizons may be less affected by minor spread differences than by overall platform stability and execution speed.
Trading flow has demonstrably migrated toward platforms offering transparent and competitive pricing. PrimeXBT's market positioning targets this demand, particularly among crypto traders accustomed to wider spreads who are expanding into traditional forex markets. The competitive pressure is forcing established brokers to re-evaluate their pricing models.
The key catalyst for spread dynamics will be the next FOMC meeting on September 18, 2024. Any unexpected policy shift will test broker resilience as spreads typically widen dramatically during high-volatility events. Traders should monitor the bid-ask gap on major pairs like EUR/USD in the 30 minutes following the announcement.
The 50-day moving average for the VIX index serves as a reliable indicator of expected spread volatility. A VIX reading above 20 generally correlates with a 25-40% widening of average spreads across major forex pairs. Platform technology upgrades, such as the integration of AI for liquidity aggregation, could further compress spreads throughout 2025.
Forex spreads are typically quoted in pips, while stock spreads are quoted in cents per share. The relative cost is often lower in forex due to higher liquidity; the $20 cost on a standard EUR/USD lot represents 0.02% of the notional value, compared to 0.01% for SPY. Stock spreads can widen more dramatically around earnings announcements and market opens, while forex spreads are most volatile during macroeconomic data releases.
During the 2008 financial crisis, EUR/USD spreads widened to over 15 pips during peak volatility, compared to the current 1-3 pip range. The Swiss National Bank's removal of the EUR/CHF peg in 2015 caused spreads to exceed 50 pips temporarily. Technological advancement has generally compressed spreads over the past decade, though black swan events continue to demonstrate the fragility of liquidity.
Spreads are tightest during the overlapping hours of the London and New York sessions (8:00 AM - 12:00 PM EST), when trading volume and liquidity peak. They typically widen during the Asian session overnight and significantly during weekends when interbank markets are closed. Economic calendars showing major data release times help traders avoid periods of anticipated spread expansion.
Spread width is the decisive factor in trading cost efficiency for active market participants.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. CFD trading carries high risk of capital loss.
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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.