It widens when the market's thin:and narrows when the crowds come in.
A spread that fluctuates based on market conditions, liquidity, and volatility.
Variable spreads are typically tighter during high-liquidity sessions and wider during news events or off-peak hours.
In plain words
A variable spread, also called a floating spread, is a gap between the buying and the selling price that changes from moment to moment with market conditions. It narrows when many participants are quoting prices and widens when few are.
See it move
Variable spread: the distance between Ask and Bid
Why it matters
The cost of opening a trade therefore depends on when it is opened. Spreads commonly widen around major news releases, at the daily rollover time and when markets reopen after a weekend, and a wider spread can trigger stop orders that a narrow one would not have reached.
Worked example
An example only. The figures are round and invented for the arithmetic: they are not market prices.
The spread on a pair is 1 pip in the busiest hours and 5 pips for a few seconds around a news release, and a trader deals in one standard lot.
- 1Cost in busy hours1 × 10 = 10 units of the quote currency.
- 2Cost around the release5 × 10 = 50 units of the quote currency.
- 3Difference50 − 10 = 40.
The same trade costs 40 units of the quote currency more to open during the release than in normal hours.
A common mistake
A low “typical” or “from” spread is not the spread at every moment. With a variable spread, the figure that counts is the one on the screen when the order is sent.
Check yourself
Educational information, not investment advice or a recommendation to trade.