What Is the Cost of Spread?

Spread is the difference between the bid and ask prices.

To calculate the cost of spread, we can use below steps:

1. We need to calculate the spread or the difference between the 2 prices

2. We need to multiply the spread with the trading size and contract size

Note that spread cost is presented in the counter currency or the second currency.

Example 1: How much is the cost of spread for 1 lot and 0.5 lot of EURUSD?

Step 1

1.06686 - 1.06683 = 0.00003

Step 2 (for 1 lot EURUSD)

0.00003 x 1 x 100,000 = 3 USD (counter currency is USD)

Step 2 (for 0.5 lot EURUSD)

0.00003 x 0.5 x 100,000 = 1.5 USD (counter currency is USD)

Example 2: How much is the cost of spread for 1 lot of Gold?

Step 1

1920.78 - 1920.70 = 0.08

Step 2

0.08 x 1 x 100 = 8 USD (counter currency is USD)

Example 3: How much is the cost of spread for 1 lot of USOil?

Step 1

89.776 - 89.771 = 0.005

Step 2

0.005 x 1 x 1000 = 5 USD (counter currency is USD)

Example 4: How much is the cost of spread for 1 lot of USDCAD?

Step 1

1.34674 - 1.34669 = 0.00005

Step 2

0.00005 x 1 x 100,000 = 5 CAD (counter currency is CAD) or 3.71 USD

Example 5: How much is the cost of spread for 1 lot of AUS200Cash?

Step 1

7001.40 - 7000.80 = 0.6

Step 2

0.6 x 1 x 10 = 6 AUD (counter currency is AUD) or 3.85 USD

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