Why spreads widen: news, rollover, thin markets and how to check real spreads

Spreads widen when the banks and liquidity providers that price currencies face more risk or have fewer people to trade with. That happens predictably around major economic releases, the daily rollover at 5pm New York time, quiet hours between sessions, the weekend open and holidays, and unpredictably during shocks. A wider spread is a higher cost on every trade opened or closed at that moment, and it can trigger stops that the chart suggests were never touched.

What a spread actually pays for

The spread is the difference between the bid, where you can sell, and the ask, where you can buy. If the bid/ask mechanics are new, read reading a forex quote first.

Whoever quotes you a two-way price, whether a bank, a non-bank market maker or your broker, is offering to take the other side of your trade immediately. The moment they do, they hold a position they did not choose and have to manage or offload it. The spread is their compensation for that risk, plus their margin.

Three things therefore decide how wide the spread is:

1. How uncertain the next price is. If the price could jump in the next second, quoting a tight two-way price is dangerous.
2. How easy it is to offload the position. When many participants are active, a dealer can lay off risk quickly. When few are active, they may hold it for longer.
3. Competition. Many dealers competing for the same flow push spreads in. Fewer dealers mean less pressure.

Every cause of spread widening is a change in one or more of these. Keep that in mind and the list below stops being a set of rules to memorise. The how the forex market works guide explains who these liquidity providers are and how retail prices are built from theirs.

Scheduled economic releases

The most predictable widening comes around high-impact data and central bank decisions: US non-farm payrolls, inflation figures, central bank rate announcements and the like.

In the minutes before a major release, liquidity providers often pull back their quotes or widen them, because they do not want to be holding a position when a surprise number lands. In the seconds after the release, the price can move in steps as the market digests the figure, and spreads can be many times their normal width. They usually narrow back over the following minutes as participants return, though after a big surprise it can take longer.

What this means in practice:

• A market order placed at the moment of a release may be filled at a much wider spread and with slippage on top.
• Pending orders near the current price can be filled at worse levels than expected.
• Stops close to the price are more likely to be triggered by the widening alone.

The economic calendar guide shows how to see which releases are coming and how they are rated for impact, and how economic data moves forex explains why surprises against consensus matter more than the numbers themselves.

The daily rollover

Around 5pm New York time, the forex trading day ends and the next begins. This is when swaps are applied, value dates roll forward and many liquidity providers close their books for the day. For a short window, often a few minutes either side, and sometimes longer, liquidity is at one of its lowest points of the day.

Spreads at rollover can be several times their daytime width, especially on minor and exotic pairs. Many traders are surprised to find a position stopped out at around the same time every evening, when the chart shows nothing unusual. That is often the rollover spread.

Because 5pm New York is fixed to US time, the rollover falls at different times for traders elsewhere, and it shifts during the weeks when the US and Europe change clocks on different dates. The forex market hours guide explains the timing, and the market hours tool shows sessions and rollover in your own time zone. The swap guide covers what is charged at that moment.

Quiet hours between sessions

Liquidity in forex follows the sun. It is highest when the big financial centres overlap, especially London and New York, and lowest in the gap after New York closes and before Asia is fully under way.

During quiet hours there are fewer dealers quoting and fewer clients trading, so spreads widen. The effect depends on the pair. Yen pairs and Australian and New Zealand dollar pairs have more natural activity in Asian hours than, say, EUR/GBP or the Scandinavian currencies. A pair whose home markets are asleep tends to have wider spreads than one whose home market is open.

This is a cost issue for anyone who trades outside the main sessions, and an important reason why a "typical spread" figure means little unless you know which hours it covers.

Weekends and the Monday open

The retail forex market closes on Friday evening, New York time, and reopens on Sunday evening as trading begins in the Asia-Pacific region. In the last part of Friday and the first hour or two after the Sunday open, liquidity is thin.

On the Sunday open specifically, prices can gap from where they closed on Friday if anything happened over the weekend, and spreads are often very wide until more participants arrive. Pending orders and stops that fall inside a gap are filled at the first available price, which can be some distance away. Our guide on gap risk and weekend risk covers this in detail.

Holidays

When a major financial centre is closed, the currency of that centre is thinner. Some patterns worth knowing:

• Christmas and New Year. The period between Christmas and early January is one of the thinnest of the year across almost all pairs. Many dealing desks run with reduced staff, and spreads can stay wide for long stretches. The yen flash crash of 3 January 2019 happened in early Asian trading during this holiday-thinned period, when the yen jumped sharply against several currencies in minutes.
• Local holidays. A UK bank holiday thins sterling trading; a US holiday such as Thanksgiving thins dollar trading; Japanese holiday weeks thin the yen. The market does not close, but fewer participants are active.
• Early closes. Some markets close early on the eve of holidays, compressing activity and widening spreads in the afternoon.

The quarterly economic calendar guides list the main holidays and thin periods for each part of the year.

Unscheduled shocks

Some of the widest spreads in history came from events no one had scheduled.

• On 15 January 2015 the Swiss National Bank unexpectedly removed its minimum exchange rate against the euro. The Swiss franc jumped, liquidity in franc pairs vanished, and many orders were filled far from their requested levels.
• On 7 October 2016, during Asian hours, sterling fell sharply in a matter of minutes in what became known as a flash crash, before recovering much of the move.
• Political events, geopolitical shocks and surprise central bank actions can have similar effects on a smaller scale.

In these conditions dealers widen spreads dramatically or stop quoting altogether, and the spread a broker shows reflects that. There is no way to avoid unscheduled shocks entirely, which is why position size and the use of stops matter more than any attempt to time around them. The where to put a stop-loss guide and the position sizing guide are the places to start.

Pair-specific and account-specific reasons

Some spread differences are permanent rather than temporary.

• Majors versus minors and exotics. EUR/USD and USD/JPY are among the most traded instruments in the world and carry the narrowest spreads. Crosses are wider, and exotic pairs, involving currencies of smaller or emerging economies, are wider still and widen further in stress. The currency pairs guide explains the categories.
• Account type. A standard account builds the broker's charge into a wider spread; a raw-spread account passes through a narrower market spread and charges commission separately. Both widen at the same moments, but from different starting points. See spreads and commissions.
• Fixed versus variable spreads. Some brokers offer fixed spreads, which do not move with the market. They are usually wider than variable spreads in normal conditions, and the broker manages the risk in other ways, which may include requotes or restrictions when conditions are extreme. Read the terms carefully: "fixed" often has exceptions.

The trap: your chart shows the bid

Most charting platforms draw candles using the bid price. That has a consequence many traders learn the hard way.

• A long position is closed by selling at the bid. Its stop is triggered when the bid reaches the stop price, which you can see on the chart.
• A short position is closed by buying at the ask. Its stop is triggered when the ask reaches the stop price. The ask is above the bid by the spread, and it is not usually drawn on the chart.

So when spreads widen, a short position's stop can be triggered even though the chart, which shows only the bid, never got there.

Illustrative example: you are short EUR/USD with a stop at 1.10500. During the day the spread is 0.8 pips. At rollover the bid sits at 1.10460 and the spread widens to 5 pips, putting the ask at 1.10510. Your stop is triggered at the ask, at 1.10510 or worse, even though the highest bid on the chart is 1.10460, four pips below your stop. You were stopped out by the spread, not by the market.

Some platforms let you display the ask line or ask-based candles. Turning that on makes the risk visible. Leaving a little extra room beyond the normal spread on short-side stops, or not having tight stops sitting through the rollover, are common ways traders account for it.

What wider spreads cost: a worked example

Illustrative numbers. A trader opens and closes 1 lot of EUR/USD, where one pip is worth $10.

• During the London and New York overlap, with a typical spread of 0.8 pips: cost $8.
• At the daily rollover, with a spread of 4 pips: cost $40.
• In the seconds after a major US release, with a spread of 8 pips: cost $80, before any slippage.

The same trade, the same broker, a tenfold difference in cost depending only on timing. For a trader whose average target is 15 pips, an 8-pip spread uses up more than half of it before the trade starts.

Spread widening also affects open positions. Your equity values each open position at the price you could close it at right now. When the spread widens, that closing price gets worse, so equity falls and margin level drops, even if the mid price has not moved. On a heavily used account, a wide rollover spread can be enough to push margin level towards a margin call or stop-out. The margin call and stop-out guide explains the mechanics.

How to check typical versus minimum spreads

A broker's pricing page usually advertises the minimum spread, often "from 0.0" or "from 0.1" pips. That is the narrowest it has quoted, possibly for an instant. What you need is the typical spread at the times you trade.

Ways to find it:

1. Published average spreads. Some brokers publish average spreads by pair, and the better ones break them down by hour of the day or by session. A table that shows the rollover hour separately is far more honest than a single number.
2. Your platform's spread display. Most platforms can show the live spread in the market watch window. Watch your main pairs at your usual trading times, at rollover and during a release, and note what you see.
3. A demo account log. Over a week or two, write down spreads at fixed times of day. Demo prices usually come from the same feed as live ones, though execution can differ, so treat it as an estimate.
4. Your live trade history. The spread at the moment each order was filled is the spread you actually paid. If your platform records bid and ask at execution, you can calculate an average directly.
5. Contract specifications. These show trading hours, any break around rollover, and for some instruments a stated typical spread.

When comparing brokers, compare like with like: the same pairs, the same hours, the same account type. The how to compare trading costs guide shows how to turn typical spreads into an all-in figure per trade and per month, and our How we rank page explains how we assess spreads in broker reviews.

Practical ways to live with spread widening

None of these is a rule, and none removes risk, but they are common ways traders reduce the cost of wide spreads.

• Know the clock. Keep the rollover time and the major sessions in your local time. The market hours tool does this automatically.
• Check the calendar. Know when high-impact releases and central bank decisions are due, and decide in advance whether you want orders exposed at that moment.
• Look at the spread before you trade. If it is several times normal, the cost of entering now is several times normal.
• Consider limit orders. A limit order fills at your price or better, so it does not pay a widened spread to enter, though it may not fill at all. The order types guide explains the trade-off.
• Mind your stops through rollover and releases. Very tight stops, especially on short positions, are vulnerable to spread spikes.
• Size for the worst normal case. Position size based on a stop distance that does not allow for a wide spread understates the real risk. The position size calculator helps with the numbers.

Common mistakes

• Comparing brokers on minimum spreads. The headline number may be available for a fraction of a second a day.
• Trading at rollover without realising. In some time zones rollover falls at a convenient evening hour, and trades placed then pay the day's widest spread.
• Holding tight stops through releases. The spread spike alone can trigger them, and the fill can include slippage.
• Forgetting the ask on short trades. A chart showing only the bid hides where short stops are triggered.
• Assuming fixed spreads are always fixed. Read the exceptions in the terms.
• Blaming manipulation for every spread spike. Widening at rollover, during news and on holidays happens across the market. Persistent spikes far beyond other brokers, or only on your stops, are a different matter and worth raising with the broker, and if unresolved with its regulator.

Wide spreads are one of many costs that work against short-term traders in particular. Most retail CFD accounts lose money, as our risk warning explains, and understanding when costs spike is part of not adding to those losses unnecessarily.

Frequently asked questions

Why do spreads widen at 5pm New York time?

That is the daily rollover, when the forex trading day ends, swaps are applied and many liquidity providers close their books. Fewer participants are quoting prices for a short period, so spreads widen until liquidity returns as the new day gets under way.

Why do spreads widen during news?

Before and after major releases, the next price is highly uncertain, and liquidity providers either widen their quotes or pull them to avoid being caught on the wrong side of a surprise. Spreads usually narrow again within minutes, though a big surprise can keep them wide for longer.

Can a widening spread trigger my stop-loss?

Yes. A long position's stop is triggered by the bid and a short position's stop by the ask. When the spread widens, the ask rises away from the bid, so a short's stop can be hit even if the bid-based chart never reached it. A long's stop can be hit if the bid drops as the spread widens around it.

What is the difference between minimum and typical spread?

The minimum spread is the narrowest a broker has quoted, often only briefly at the most liquid times. The typical or average spread reflects what you are likely to pay on a normal trade. For comparing costs, the typical spread at the hours you trade is the figure that matters.

Are fixed spreads better than variable spreads?

Neither is better in general. Fixed spreads are predictable but usually wider in normal conditions, and the broker may manage extreme conditions with requotes or other restrictions. Variable spreads are usually narrower most of the time but widen in thin or volatile markets. The right choice depends on when and how you trade.

Why are spreads wider on exotic pairs?

Exotic currencies are traded far less than the majors, by fewer dealers, so it is harder and riskier for a dealer to offload a position. That cost is passed on in a wider spread, which widens further when liquidity in those currencies dries up.