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Spread & Execution

Understanding spread, slippage and execution types is essential knowledge that directly affects your profitability on every single trade.

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What is Spread?

The spread is the difference between the BID price (sell) and ASK price (buy). It is how brokers make money on every trade.
Pair Typical Spread ECN Spread Volatility
EUR/USD 1.0-2.0 pips 0.1-0.5 pips Low — best for beginners
GBP/USD 1.5-2.5 pips 0.3-0.8 pips Medium
USD/JPY 1.0-2.0 pips 0.2-0.5 pips Medium
XAU/USD (Gold) 20-40 pips 10-20 pips High
GBP/JPY 3.0-5.0 pips 0.8-1.5 pips High
Exotic pairs 10-50+ pips 5-30 pips Very High

Order Types Explained

  • Market Order: executes immediately at the best available price. Fast but can have slippage during news.
  • Limit Buy Order: buy only at or BELOW a specified price. Example: buy EUR/USD at 1.0800 when current price is 1.0850.
  • Limit Sell Order: sell only at or ABOVE a specified price. Sets your take profit level.
  • Stop Buy Order: buy when price RISES to a level (breakout entry). Example: buy EUR/USD if it breaks above 1.0900.
  • Stop Loss Order: automatically closes your trade at a predetermined loss level — essential risk management.
  • Trailing Stop: SL that moves with price. Locks in profit as price moves in your favour.

Pro Tip: For entries, limit orders almost always give better fills than market orders. Place a limit order at the exact level you want to buy/sell rather than chasing with a market order.

Slippage

Slippage occurs when the price you expect to enter at differs from the price you actually get filled at.
  • Positive slippage: you get filled at a better price than ordered — can happen in your favour
  • Negative slippage: you get filled at a worse price — most common during news events
  • Causes: high volatility, low liquidity, slow internet connection, bad broker execution
  • How to minimize: trade during liquid sessions, use limit orders, avoid news releases
  • ECN brokers generally have less slippage than market-maker brokers
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Key Takeaways

  • Spread = broker's fee built into every trade
  • Tighter spread = lower cost per trade
  • Slippage is normal during high-volatility news
  • Market order = instant fill at current price
  • Limit order = fills at your specified price or better
  • Stop order triggers when price hits your level
  • ECN brokers have tightest spreads
  • Trade during liquid sessions to minimize spread

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