What Are Spreads in Forex Trading?
A spread is the difference between the buy price (ask) and the sell price (bid) of a currency pair. It's the primary cost of trading forex on XM — and understanding it is essential to calculating your real trading costs.
Spread Example
Bid (Sell)
1.08500
Spread
0.6 pips
Ask (Buy)
1.08506
EURUSD on XM Ultra Low account — you pay 0.6 pips to enter any trade
XM Spreads by Account Type
XM offers three account types with different spread structures. Here's how they compare on the most popular instruments:
| Instrument | Ultra Low | Zero | Standard |
|---|---|---|---|
| EURUSD | 0.6 pips | 0.0 pips* | 1.6 pips |
| GBPUSD | 0.8 pips | 0.1 pips* | 2.1 pips |
| USDJPY | 0.7 pips | 0.1 pips* | 1.7 pips |
| AUDUSD | 0.8 pips | 0.1 pips* | 1.8 pips |
| USDCHF | 0.9 pips | 0.2 pips* | 1.9 pips |
| XAUUSD (Gold) | 1.8 pips | 1.5 pips* | 3.0 pips |
| US30 (Dow Jones) | 3.0 pts | 2.0 pts* | 5.0 pts |
| BTCUSD | 50 pips | 45 pips* | 60 pips |
*XM Zero account charges $3.5 commission per lot per side ($7 round turn). Add this to the spread for total cost.
How to Calculate Your Real Trading Cost on XM
The spread alone doesn't tell the full story on the Zero account. Here's how to calculate the true total cost per trade:
Ultra Low Account — 1 lot EURUSD
Zero Account — 1 lot EURUSD
Key Insight
For most traders, Ultra Low is cheaper than Zero on EURUSD ($6 vs $7 per lot). Zero only wins when you trade very high volumes (scalpers doing 10+ lots per day) where the 0.0 pip spread saves more than the commission costs.
Fixed vs Floating Spreads on XM
XM uses floating (variable) spreads on all account types. This means spreads widen during:
High-impact news events
NFP, FOMC, CPI, central bank decisions — spreads can widen 3–10x during these events. Avoid trading 5 minutes before/after major news.
Low liquidity periods
Late Friday afternoon, Sunday market open, and major holidays. Spreads widen significantly when fewer market makers are active.
Market open/close
The first and last 30 minutes of major sessions (London open, NY close) can see temporary spread widening.
5 Ways to Minimize Spread Costs on XM
Use XM Ultra Low or Zero account
Standard account spreads are 2–3x wider than Ultra Low. Always use Ultra Low or Zero for lower costs.
Trade during peak liquidity hours
London-NY overlap (13:00–17:00 GMT) has the tightest spreads on major pairs. Avoid trading during Asian session for EUR/GBP pairs.
Avoid trading around news events
Spreads widen massively during high-impact news. Use XM's economic calendar to identify and avoid these windows.
Stick to major pairs
EURUSD, GBPUSD, USDJPY have the tightest spreads. Exotic pairs can cost 10–30x more per trade.
Use limit orders instead of market orders
Limit orders fill at your specified price, avoiding slippage. Market orders during volatile periods can fill at worse prices.
Related Guides
Trade with the Tightest Spreads on XM
EURUSD from 0.6 pips on Ultra Low. Open a free demo to test spreads in real market conditions.