The critical characteristic of the bid/ask spread is that it is also the transaction cost for a round-turn trade.
Round-turn means a buy (or sell) trade and an offsetting sell (or buy) trade of the same size in the same currency pair.
For example, in the case of the EUR/USD rate of 1.2812/15, the transaction cost is three pips.
The formula for calculating the transaction cost is:
Transaction cost (spread) = Ask Price – Bid Price
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