The Bid-Ask Spread in foreign exchange (FX) refers to the difference between the bid price and the ask price in a currency pair. It represents the transaction cost for traders when buying and selling currencies.

Bid Price: The price at which a buyer is willing to purchase the base currency.
Ask Price: The price at which a seller is willing to sell the base currency.

The spread is the gap between these two prices. In highly liquid markets, such as major currency pairs (e.g., EUR/USD), the spread is typically narrow, sometimes just a fraction of a pip. In less liquid markets or exotic currency pairs, the spread can be much wider.

For example:

If the EUR/USD has a bid price of 1.1200 and an ask price of 1.1202, the bid-ask spread is 2 pips (the difference between the ask and bid price).

Traders need to be aware of the spread because it affects the cost of entering and exiting positions. A larger spread can make trading more expensive, especially for short-term traders like day traders.

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