The temporary or scheduled increase in the gap between bid and ask when liquidity thins, typically at rollover, around data, and over weekends.
Spreads are not fixed on most accounts; they float with the underlying market. They widen at the daily rollover, in the minutes around high-impact data, before and after holidays, and at the Sunday open. Providers withdraw quotes when they cannot price risk confidently.
A widening spread can trigger stops that price never really reached in the market, because a stop is checked against the bid for longs and the ask for shorts. Sizing and stop placement should assume the spread will not be the average.
Example: EUR/USD spread averages 0.3 pips but hits 12 pips for 40 seconds on an inflation release. A long with a stop 10 pips below is stopped out on the widened bid even though the mid never fell that far.
Original diagrams for the ideas on this page. Illustrative, not real market data.
The bid-ask spread. Buy orders sit below, sell orders above, and the gap between the best bid (50.01) and best ask (50.04) is the spread you pay to cross. Bar length shows the size resting at each price.Rolling a futures position forward. Every futures contract has an expiry date, so a trader who wants to stay in the market closes the front-month contract and opens the next one. That swap is the roll, and the two contracts rarely trade at the same price.
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