When you see the quoted price for a currency "pair" - e.g. USD/JPY -you will notice it looks something like this:
105.26/105.30
That means you can BUY $1 US for 105.30 yen or you can SELL $1 US for 105.26 yen. The difference here is 4 yen - that is the "spread". It is usually expressed in "pips" - ( a "pip" is the last digit after the decimal point) - this is a 4-pip spread.
At any given moment, the amount that will be received in the counter currency - the yen in this case - when selling a unit of the base currency (the dollar here) will be lower than the amount of the counter currency which is required to BUY a unit of base currency. So if you buy a currency and immediately sell it, you will lose money because there has been no time for the exchange rate to move.
When Forex trading you will find a smaller spread is a better prospect than a large spread because it only requires a small movement in exchange rates before you can profit from a trade.
The smaller a spread is, the more competitive it is. Easy-Forex uses very competitive spreads and this is why they are able to allow you to trade commission-free.
Find out more at http://www.bizwrite.co.uk/Forex/forexindex.html
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