Spreads

Understanding Spreads: What Is A Spread?

A spread is the difference between the ask price (the price you buy at) and the bid price (the price you sell at) quoted in pips. If the quote between EUR/USD at a given moment is 1.2220/2, then the spread is 2 pips. If the quote is 1.22235/50, then the spread is 1.5 pips.
It is how brokers make money. Wider spreads result in a higher ask price and a lower bid price. As a consequence, you pay more when you buy and get less when you sell, making it more difficult to realize a profit

Brokers don't typically earn the full spread, especially when they hedge client positions. The spread compensates the market maker for taking on risk from the time it executes a client trade to when the broker's net exposure is hedged (possibly at a different price).
Why Are Spreads So Important?

Spreads affect the return on your trading strategy in a big way. Probably more than you think. As a trader, your sole interest is buying low and selling high. Wider spreads means buying higher and having to sell lower. A half-pip lower spread doesn't sound like much, but it can easily make the difference between a profitable trading strategy and an unprofitable one.

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