Forex glossary
spread (bid-ask spread)
The difference between ask and bid for the same instrument. If P/L uses the correct actual fill prices, this difference is already reflected in the result.
Illustrative example
How does it work in practice?
Suppose EUR/USD bid is 1.2000 and ask 1.2003 USD per EUR. With a 0.0001 pip the spread is three pips; P/L using actual purchase and sale prices already reflects that difference.
Why do buying and selling use different prices?
Two prices and two position directions
EUR/USD model: bid 1.1000 and ask 1.1002 USD per EUR; one pip is 0.0001. No commission, financing or slippage.
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| Term | What it describes | Shared example |
|---|---|---|
| bid and ask (bid-ask prices) | The client sells at bid and buys at ask. | Buying 1,000 EUR costs 1,100.20 USD; selling it receives 1,100 USD. |
| spread (bid-ask spread) | Ask minus bid, rather than a separate amount to deduct again. | 1.1002 − 1.1000 = 0.0002, or two pips. |
| Long position (bullish position) | Buying opens a long; selling closes it. | Immediately closing 1,000 EUR at unchanged quotes gives −0.20 USD. |
| Short position | Selling opens a short; buying it back closes it. | Selling 1,000 EUR at bid and repurchasing at unchanged ask gives −0.20 USD. |
Takeaway: Direction determines the order of buying and selling. P/L calculated from the correct fills already reflects the bid–ask difference.
Change an assumption, see the result
What changes if…?
Change the Bid–Ask gap while keeping entry and exit quotes identical. Observe how spread and unit quantity affect the initial P/L of both directions.
EUR/USD model: 1 pip = 0.0001. Long: buy at Ask, close at Bid; short reverses the sides. Quotes stay unchanged between entry and exit. No slippage, commissions or swap.
Check your understanding
Calculate P/L from fills without deducting spread a second time.
Show the answer and explanation
5 USD; do not deduct the initial spread again.
(1.1007 − 1.1002) × 10,000 = 5 USD. The actual ask and bid fills already reflect the price difference.
From quotes to position units
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Related terms
Sources and documentation
- MetaTrader 5: basic trading principles
Orders, deals and positions; FOK, IOC and partial-filling policies.
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The example illustrates the mechanism. Check current account conditions and instrument specifications with the provider.