The spread-to-range ratio compares an instrument's typical spread with its average daily range, and it is the fastest test of whether a market is worth trading at all. EUR/USD at a 0.6-pip spread against an 80-pip range costs under one percent of the day's movement; an exotic at 40 pips against a 300-pip range costs more than thirteen percent of it before anything has gone right.
The ratio matters most for the instruments that look attractive precisely because they move. Exotic pairs and some indices offer large ranges and charge for the privilege, and the same spread that is negligible on a multi-day swing is decisive on an intraday trade. Measure it in the session you actually trade rather than as a daily average — spreads widen at the open and around data, which is when most entries happen.
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Spreads, Commissions and the Real Cost of a Trade
Spread, commission and swap are the three costs on every forex trade — what each one is, when spreads widen, and how to compare pricing fairly.