When you open a contract for difference trade, the price you see on the platform is never a single number. There is always a bid and an ask, and the gap between them, the spread, is your first and most persistent cost. Whether you trade indices, forex, commodities, or shares, understanding how the spread works, why it matters, and how to manage it can make the difference between a profitable strategy and one that bleeds money before the market even moves.
This article explains the spread in CFD trading with concrete examples, typical values for major markets, and practical steps you can take to reduce its impact. For a broader overview of how CFDs work, start with The Complete Guide to Contracts for Difference.
What Is the Spread in CFD Trading?
The spread is the difference between the buy price (ask) and the sell price (bid) of a CFD at any given moment. When you open a trade, you pay the ask if you go long and receive the bid if you go short. Because the market price sits somewhere in the middle, your trade is immediately in a small loss equal to the spread times your position size.
For example, suppose the UK 100 (FTSE 100) CFD is quoted with a bid of 7,500.0 and an ask of 7,500.6. The spread is 0.6 points. If you buy one CFD at 7,500.6 and the market does not move, the best you could sell it for immediately is 7,500.0, a loss of 0.6 points. Multiply that by your number of CFDs and the per-point value, and you have your entry cost.
This cost is distinct from commissions and overnight financing. Many CFD providers, such as IG Group, Plus500, and CMC Markets, embed the spread in the price rather than charging a separate commission on most major indices and forex pairs. On share CFDs, however, some brokers charge a low commission and a tighter spread, or a wider spread with no commission. You should always check the fee structure before trading.
For a deeper introduction to the instrument, see What Is a CFD?.
Fixed vs Variable Spreads
CFD brokers offer two main types of spread: fixed and variable. Each has advantages and disadvantages depending on market conditions and your trading style.
Fixed Spreads
Fixed spreads do not change regardless of market volatility. For a typical FTSE 100 CFD, a fixed spread might be 1.0 point. The broker commits to that spread at all times, even during major economic announcements when many variable spreads widen.
Benefits: predictable cost, easier to calculate risk before entry, and no nasty surprises during volatile periods. Drawbacks: fixed spreads tend to be wider than variable spreads during calm trading, so you pay more when the market is quiet. Also, brokers may restrict availability of fixed spreads to certain instruments or pull them during extreme events.
Variable Spreads
Variable spreads float with the underlying market liquidity. When the underlying exchange or interbank market is deep, for example, during London session forex trading, spreads can be extremely tight. IG Group, for instance, advertises variable spreads on the FTSE 100 as low as 1.0 point, but often 0.8 points or less during liquid hours. On the other hand, during news releases, after-hours trading, or periods of low liquidity like the Asian session, variable spreads on major pairs can double or triple.
Scalpers and high-frequency traders prefer variable spreads because they can enter and exit at minimal cost when conditions are favourable. Position traders, on the other hand, may care less about micro-variations and may prefer fixed spreads for certainty.
The choice between fixed and variable depends on your strategy. If you are a day trader who trades liquid hours, variable spreads generally save you money. If you trade around events or hold positions overnight, fixed spreads protect you from widening.
How Spreads Are Calculated: Points, Pips, and Value
The spread is measured in price units specific to the instrument: points for indices, pips for forex, ticks for commodities, and cents for shares. To understand the actual cost in your account currency, you need to know two things: the spread in price units and the per-unit value of one CFD.
Let us take a typical FTSE 100 CFD trade as an example. The FTSE 100 is priced in British pounds per point. If you trade 1 CFD, each point movement is worth £1. If the spread is 0.8 points, the cost to open and close is £0.80 (0.8 points × £1). If you trade 10 CFDs, the cost is £8.
For forex CFDs, the spread is expressed in pips. EUR/USD might have a spread of 0.6 pips. If one pip is worth $10 for a standard lot (100,000 units), the round-turn cost is $6. Note that many retail CFD brokers quote in mini-lots or micro-lots, adjusting the pip value accordingly.
For share CFDs, the spread is usually a percentage of the share price. A share costing £10 might have a spread of 0.1%, that is £0.01 per share, or £10 on 1,000 shares. Some brokers add a commission on top of the spread for share CFDs. For example, CMC Markets charges a commission of 0.10% (minimum £9) for UK share CFDs, combined with a tight spread. Always read the fee schedule because the total cost can vary significantly between brokers.
To sum up the equation: Spread Cost = Spread in Price Units × Per-Unit Value × Number of CFDs. This cost is incurred once on entry and once on exit (the round-turn), but some brokers only charge the spread on entry and include the exit spread in the close price. Confirm whether your provider uses a single-spread or double-spread model.
Typical Spreads by Instrument
Below are typical spreads you can expect from major CFD providers as of 2025. These values are indicative; actual spreads depend on market conditions, your account tier, and the broker.
- FTSE 100 (UK 100): variable 0.7-1.2 points (e.g., IG Group as low as 0.8, Plus500 around 1.0)
- S&P 500 (US 500): variable 0.4-0.8 points (Saxo Bank often 0.5, eToro around 0.6)
- EUR/USD: variable 0.4-0.9 pips (IC Markets raw spreads from 0.0 pips with commission; retail brokers 0.6-1.2)
- GBP/USD: variable 0.7-1.4 pips
- Gold (XAU/USD): variable 0.2-0.5 points (IG Group 0.3, City Index 0.4)
- Brent Crude Oil: variable 2.0-4.0 points
- UK Share CFDs: spread 0.05-0.15% plus commission or wider commission-free
- US Share CFDs: spread 0.02-0.08% plus commission (e.g., Interactive Brokers 0.005% commission/low spread)
These numbers matter most when you trade frequently or in size. A scalper paying 0.8 points on the FTSE 100 versus 1.2 points can save 50% on transaction costs per trade. Over 100 trades, that difference is substantial.
To understand how leverage interacts with spread costs, read Leverage in CFDs.
Spread Costs vs Other CFD Fees
The spread is not the only cost in CFD trading, but it is the one that affects every entry and exit. Other costs include overnight swap rates (also called holding costs or financing charges), commissions (on shares and some forex), and inactivity fees. A disciplined trader accounts for all of these, but the spread is the most immediate.
For positions held longer than one day, the overnight swap becomes significant. For example, holding a long position on the FTSE 100 CFD overnight might cost you a number of points each night based on the underlying interbank rate plus the broker's markup. This is separate from the spread. Likewise, if you trade share CFDs, the commission may exceed the spread for small sizes. For a £1,000 trade with a 0.1% commission, that is £1, which might be larger than a £0.50 spread.
Always compare total cost of ownership. Some brokers advertise zero commission but have wider spreads; others offer tight spreads plus transparent commissions. There is no universal “better” model, it depends on your trading volume, instrument, and holding period.
For more on positions, see Long vs Short Positions.
How to Minimise Spread Costs
While you cannot eliminate the spread, you can manage it. Here are practical steps:
- Trade during peak liquidity. For UK indices, the best spreads are during the London open (08:00-16:30 GMT). For US indices, the New York session (14:30-21:00 GMT). For forex, overlapping sessions (London/New York) produce the tightest spreads.
- Avoid major economic announcements. Spreads widen dramatically moments before and after data releases (NFP, CPI, interest rate decisions). If you must trade, use limit orders and wider stops.
- Tighten your slippage tolerance. Some platforms allow you to set maximum slippage. A good practice is to use limit orders rather than market orders when possible.
- Choose the right account type. If you trade large volume, consider a raw spread or ECN account that adds a per-lot commission but offers spreads near zero. IC Markets, Pepperstone, and FXTM offer such accounts.
- Trade fewer, larger positions. The spread cost is the same per unit whether you trade 1 CFD or 100. If your strategy requires many small trades, the spread costs aggregate quickly.
- Use bracket orders. Set take-profit and stop-loss at order entry to avoid exiting during unfavourable spreads.
For a detailed explanation of how margin fits in, see Margin Requirements.
The Spread in Context: Real-World Example
Let us walk through a concrete trade to see how the spread impacts profitability.
Scenario: You decide to buy 50 CFDs of the S&P 500 (US 500) at the ask price of 4,500.2. The bid is 4,499.8, so the spread is 0.4 points. Each CFD is worth $10 per point. Your entry cost is 0.4 × $10 × 50 = $200. That $200 is lost the moment you click buy. To break even, the S&P 500 must rise 0.4 points to 4,500.6 (the new bid).
After one hour, the S&P 500 rises to 4,505.0 bid / 4,505.4 ask. You sell at the bid price of 4,505.0. Your gross profit is (4,505.0-4,500.2) × $10 × 50 = $2,400. Subtract the entry spread cost of $200, and your net profit is $2,200. The spread effectively reduced your return by 8.3%.
Now imagine you used a broker with a wider spread of 1.0 point. Entry cost would be $500. If you closed at the same exit, net profit would be $1,900, a 20.8% reduction compared to a no-cost trade. That is why spread comparison matters.
If you also held the position overnight, you would pay a swap rate. Suppose the overnight long funding rate is 0.02% of position value. For a $225,000 position (50 CFDs × $4,500 × $10 per point? careful: each S&P 500 CFD is $10 per point, not $10 per share; notional value is 50 × $4,500 × $10 = $2,250,000. At 0.02%, that is $450 per night. Combined with the spread, the cost of holding for five days would be $2,250 in swaps plus $500 spread, totalling $2,750, potentially eliminating profit if the trade is not sufficiently large or the move not strong enough.
Understanding these figures reinforces why spread and holding costs must be part of your trade plan, not an afterthought.
For more on managing risks including margin calls, see Margin Calls and Liquidation.
Spread and Market Makers vs ECN/STP Brokers
How a broker makes money changes the spread you pay. Market-making brokers (often termed “dealing desk”) set their own bid and ask prices. They may widen spreads to increase profit or offer fixed spreads. In contrast, ECN/STP brokers pass your order to liquidity providers and charge a small commission or markup on the raw spread. The raw spread from interbank sources can be as low as 0.1 pips on EUR/USD, but after broker markup you might see 0.3-0.5 pips.
Generally, market-making brokers have wider spreads on major indices and forex during calm periods but may offer fixed spreads and lower commissions. ECN/STP brokers offer tighter variable spreads but may have commissions that eat into profits for small account sizes. Choose according to your typical trade size and frequency.
Some brokers, like Saxo Bank, operate a hybrid model with market making on index CFDs and ECN-style execution on forex CFDs. Always read the execution policy in your broker’s terms.
To better understand the difference between direct asset ownership and CFD trading, see CFD vs Owning Asset.
Spreads in Different Account Types
Many CFD brokers offer multiple account tiers: standard, silver, gold, or VIP. Spreads are typically narrower for higher tiers because the broker rewards higher volume or larger deposits. For example, IC Markets has a standard account with spreads from 0.6 pips on EUR/USD and a raw spread account from 0.0 pips plus $3.50 per lot commission. The top-tier VIP account at CMC Markets can cut spreads by 20-40% compared to a standard account.
If you are a retail trader with a small account, you may not qualify for VIP status. However, you can still reduce spread impact by focusing on the most liquid instruments and trading during peak hours.
It is also worth noting that demo accounts often show the same spreads as standard accounts. When you transition to a live account, spreads may be tighter, but you should verify using a test trade.
For a complete picture of what you pay, also review The Complete Guide to Contracts for Difference.
Conclusion
The spread is the cost of entry in CFD trading, a small gap that can either nibble or bite depending on how you trade. By understanding the difference between fixed and variable spreads, knowing typical values for your preferred instruments, calculating costs before entering, and adopting strategies to minimise spread impact, you put yourself ahead of the majority of traders who ignore this detail.
Spread costs are not hidden. They appear on every deal ticket. Yet many traders focus only on where the market might go, forgetting that they start each trade slightly behind. Make spread awareness part of your routine. Compare brokers, time your trades, and account for the spread in your risk/reward calculations. It is one of the few costs you can control.