If you’re new to trading, the word “spread” might sound like something you put on toast. But in the world of investing, it has a very different meaning.
What Is a Spread in Trading?
In every trade you place, there are two prices involved:
- The buy price, also called the ask price, which is what you pay when buying an asset
- The sell price, also called the bid price, which is what you receive when selling the same asset
The spread is the difference between these two prices.
Here’s the key: whenever you make a trade, you start slightly in the negative because you’re buying at a higher price than you can sell for at that moment. That difference is the spread, and it’s essentially the cost of entering the trade.
Unlike fees that are listed separately, the spread is built into the price. You won’t see a line item for it, but it affects your bottom line just the same.
Why Does the Spread Exist?
Spreads serve a purpose. They:
- Help platforms and brokers cover costs
- Compensate for the risk of market fluctuations
- Reflect the liquidity (how easily an asset can be bought or sold) and volatility (how much the price moves) of an asset
In short, spreads are the trading world’s version of a markup. Like how a retailer adds a margin to the price of a product they sell, trading platforms add a spread to facilitate transactions.
The Clarity Advantage
At Clarity, we’re upfront about how we structure our pricing.
We don’t make money through commissions or platform fees. Instead, we use competitive spreads and margin rates, and we clearly show you how they work.
Here’s how:
- No commissions. You pay no commission when placing a trade
- No admin or platform fees. You’re not charged for simply having an account or using the platform
- Transparent spreads and margin fees. We disclose everything upfront so you always know the true cost of trading
Spread on Trading (ZAR and USD Accounts)
When you place a trade through Clarity using your ZAR or USD accounts (including margin accounts), the maximum spread we apply is 0.2 percent, or 20 basis points.
This spread is already built into the price displayed for each asset, whether you’re buying or selling. So what you see is what you pay.
Depending on the direction of your trade:
- If you’re buying, the spread may be applied to the ask (buy) price
- If you’re selling, the spread may be applied to the bid (sell) price
Spread on Forex (ZAR to USD or USD to ZAR Transfers)
When you convert money between currencies on Clarity, we apply a 0.5 percent (50 basis point) spread to the conversion rate.
This spread is already included in the live rate you see when making the transfer. You won’t see a separate fee, and there are no hidden FX costs.
Margin Rates
Margin accounts allow you to trade with borrowed funds, giving you access to more capital. However, margin trading involves additional risk, and Clarity applies a margin rate on top of the spread for margin accounts.
This fee is:
- Only applied to ZAR and USD margin accounts
- Charged in addition to the trading or FX spread
- Clearly disclosed before any margin trade is executed
Let’s Break Down Spread With Examples
📈 Example 1: 0.2 Percent Spread on Trading
- Asset price: R10,000
- Spread (0.2 percent) = R20
- Buy price: R10,000
- Sell price: R9,980
In this case, the moment you buy, you’d be able to sell for R9,980—so you’d be starting R20 down. The price of the asset must rise by more than R20 for you to make a profit.
This is exactly how the maximum spread on Clarity trades would apply.
📈 Example 2: 0.5 Percent Spread on FX
- You want to convert R10,000 to USD
- Spread (0.5 percent) = R50
- The live conversion rate is slightly adjusted by this R50 to cover the spread
- There are no added fees or commissions
This adjustment ensures the rate you see is the final rate. You won’t get hit with surprise deductions afterward. It’s all already factored in.
What Affects the Size of a Spread?
Spreads vary depending on several market factors:
- Liquidity: Heavily traded assets tend to have smaller spreads
- Volatility: Assets with fast or unpredictable price changes usually have wider spreads
- Market hours and demand: Prices may fluctuate more after-hours or during major news events
In Summary
✅ The spread is the built-in cost between the buy and sell price
✅ It’s not a separate fee but it directly affects how quickly you can turn a profit
✅ Clarity applies a maximum 0.2 percent spread on trades and a 0.5 percent spread on currency conversion
✅ No commissions, no platform fees—just simple, transparent pricing
✅ Margin rates apply only to margin accounts and are always disclosed in advance
