Spread is the different between the buying price and the selling price and is the commission which you pay, as currency trader. For the example, you want to convert USD to Euros at the bank, they will tell you that the buying price is 1.56 and the selling price is 1.49. So, you would have to pay a little more than one and a half USD in order to buy one Euro. In the other hand, is you want to sell one Euro to the bank, the bank will buy one Euro at a price slightly lower than one and a half USD.
Let see the example below:
The buying rate is 1.56, and the selling rate is 1.49
So, if you sold 1000 USD to the bank, you will receive 641 Euros, and you will get only 955 USD by selling the Euros back.
- (1000 / 1.56 = 641)
- (641 X 1.49 = 955)
- (1000 – 955 = 45)
The other 45 USD is the profit of the change store, this is the commission they charge from their customers. This is the commission that that you will pay and there are no additional commissions need to pay.
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