Spread widening

Spread widening is an increase in the difference between the bid (buy) and ask (sell) prices for a currency pair. This typically happens during periods of low market liquidity, high volatility, or significant economic news releases. Brokers adjust spreads to reflect increased risk or reduced availability of counterparties, leading to larger price gaps.

For a retail trader, spread widening increases transaction costs, as the entry and exit points become less favorable. It can lead to premature stop-loss triggers if the wider spread pushes the bid or ask price beyond a set stop level. Traders must account for potential widening, especially around high-impact news, to manage risk effectively.