Fixed spread
Family IV · Costs
Not to be confused with floating spread, spread, forex spread, good spread.
Fixed spread is a pricing model in which the difference between the bid and ask price of an instrument remains unchanged under normal market conditions. The broker sets a specific value, such as 2 pips on EUR/USD, and maintains it during the quoted trading session. This contrasts with floating spreads, which move with supply and demand.
How fixed spreads work
A fixed spread is maintained by the broker rather than by the interbank market. The broker quotes a constant bid-ask difference and absorbs the underlying market volatility. Because the spread is stable, the cost of a round-turn trade is predictable at the moment of entry.
Fixed spreads are often associated with market maker or dealing desk execution models, where the broker takes the other side of the client's trade. They may be wider on average than floating spreads to compensate for the risk the broker assumes during volatile periods.
Worked example
A trader buys 1 standard lot (100,000 units) of EUR/USD with a fixed spread of 2 pips. The pip value for this position is $10.
The $20 cost is fixed at entry and does not change if the market becomes more volatile during the trade, provided the broker maintains the quoted spread.
Conditions and variations
Fixed spreads are not guaranteed at all times. Many brokers reserve the right to widen them during news releases, market opens, or periods of low liquidity. The exact conditions are set out in the broker's terms and vary by jurisdiction and regulator.
Fixed spreads may also apply only to certain account types or instruments. Traders should check whether a commission is charged separately, as some fixed-spread accounts combine a spread with a per-lot commission.
Often confused with
- floating spread
- A floating spread changes continuously with market liquidity and volatility, whereas a fixed spread is held constant by the broker; the visible sign is whether the quoted bid-ask difference stays the same or moves during the trading session.
- spread
- The spread is the general difference between bid and ask prices, while a fixed spread is a specific type of spread that remains unchanged; the visible sign is the presence of a constant value rather than a fluctuating one.
- forex spread
- A forex spread refers to the bid-ask difference in currency pairs, which can be fixed or floating, whereas a fixed spread is defined by its constancy; the visible sign is whether the spread on a currency pair is quoted as a stable number or varies tick by tick.
- good spread
- A good spread is a subjective assessment of a low-cost spread, while a fixed spread is a pricing model that may or may not be considered good; the visible sign is that a fixed spread is a stated constant, whereas a good spread is a comparative judgement.