Separating bid, ask and spread when comparing currency costs

BabyPips explains that a currency pair normally has two quoted prices. The bid is the price available for selling the base currency, while the ask is the price for buying it. The difference between them is the bid–ask spread.

A spread can be expressed in pips by dividing the price difference by the pair’s pip size. This is separate from any explicit commission, financing charge or conversion cost. Comparing providers on the word “free” can therefore miss a cost incorporated into the quote itself.

For a useful comparison, record both sides of the quote at the same time and for the same transaction size. Spreads can change with conditions, so a marketing minimum is not necessarily the price available for a particular order. The lesson supplies a cost concept, not a guarantee about any broker’s execution.