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In CFD trading, the spread is the difference between the buy price and the sell price quoted for an instrument. The buy price quoted will always be higher than the sell price quoted, and the underlying market price will generally be in the middle of the these two prices.
When you place a trade, you will either buy or sell the particular product you're trading, depending on whether you believe the underlying market price will rise or fall.
Once your trade is placed and the price has moved in your favour beyond the cost of the spread, it will be a profit making trade. Likewise, while it remains between the spread range or outside of it against you, the trade will be a losing trade.
The spread is one of the key costs involved in CFD trading – the tighter the spread is, the better value you're getting as a trader. Note that there are other potential costs to consider, for example in CFD trading some markets involve a commission charge, or a combination of spread and commission.
The spread is the last large number within a price quote.
The spread on the UK 100 shown here is 1.0, calculated by subtracting 6446.7 (sell price) from 6447.7 (buy price).
The spread on the GBP/USD shown here is 0.9. If you subtract 1.65364 from 1.65373, that equals 0.00009, but as the spread is based on the last large number in the price quote, it equates to a spread of 0.9.
The bid-ask spread is the difference between the bid (buy) price and ask (sell) price for a financial instrument. Live buy and sell prices are displayed on our platform, and change depending on a number of factors including market sentiment and liquidity in the market. Read more about bid and ask prices here.
A wide spread indicates that there is a large difference between the bid and ask price of an instrument. This could potentially signal that the market is more volatile than usual, or there is low liquidity. A wider spread usually comes with a higher level of risk, so you should consult our risk-management guide before opening a position.