What Is the Spread? Why It Suddenly Widens at Data Releases and the Daily Open
The spread is the cost you pay the moment you open a trade. It is small most of the time, but around major data releases, the daily open and in thin markets it can widen several times. Here is what it is, when it widens and how to limit its impact.
You open a trade, price has not moved, yet you are already slightly down. That is the spread: the cost you pay the moment you enter. It is small most of the time, but at certain times it can widen several times over.
What is the spread?
Every market on your platform shows two prices:
- Buy (ask): the price you pay when buying, the higher one
- Sell (bid): the price you get when selling, the lower one
The gap between them is the spread. As soon as you buy, your position is valued at the sell price, so you start slightly negative and price has to travel the spread before you make money.
When does the spread widen?
- Around major data releases: in the minutes around nonfarm payrolls, CPI or rate decisions, fewer orders sit in the market and spreads often widen
- Around the daily open and close: gold and forex take a break of about one hour each day, roughly 06:00 to 07:00 UTC+8 in winter, and spreads are usually widest around it
- The Monday open: weekend news gets priced in at once, price can gap and spreads are wide
- Less traded markets and quiet hours: thinly traded currency pairs, or quiet parts of the Asian session
What does a wider spread do?
- Higher cost: the same trade has to move further before it breaks even
- Stops triggered early: stops trigger on the other side of the spread, so when it widens suddenly your stop can be hit even though the chart price never got there
- Short-term trades suffer most: when the target is only a few dollars, the spread is a large share of it
How to limit the impact
- Avoid entering in the minutes around data releases: wait for spreads to return to normal
- Avoid the daily open and close: do not rush in around the daily break
- Give your stop some room: do not place it right on support or resistance
- Check the current spread before you trade: if it is much wider than usual, wait
For release times of major data, see the economic calendar. For the full trading hours table, see US winter time trading hours. Download the Borearis app to get reminders before major releases.
Borearis Research Team · For information only, not investment advice. Trading involves risk.
