Spread Spike
Definition
A spread spike is a temporary, often dramatic widening of the bid-ask spread — for example, EURUSD's typical 0.3-pip spread briefly jumping to 5-10 pips around news events, rollover, or low-liquidity windows. Spread spikes can trigger stop-losses on positions that wouldn't otherwise be hit, blowing up otherwise-sound EA strategies.
In-depth: Spread Spike
Spread spikes are short-duration events where bid-ask spreads widen significantly beyond their normal range. They occur for several reasons:
1. Rollover (typically 22:00-23:00 GMT) — liquidity providers withdraw quotes around the daily rollover, and brokers widen spreads to manage the temporary thin book. Many brokers experience consistent spread spikes here daily. 2. News events — high-impact economic releases (NFP, CPI, FOMC, ECB) trigger spread widening immediately before and during the release as liquidity providers reduce quoted size to manage risk. 3. Asian session — low-liquidity periods for European pairs naturally produce wider spreads on EUR/GBP-based crosses. 4. Market opens — Monday open after weekend gaps; daily session opens for non-major instruments. 5. Flash events — black-swan moves (CHF de-pegging 2015, etc.) produce extreme spread widening and price gaps.
Impact on EAs: - Stop-loss orders: stops execute at the bid (for long positions) or ask (for short positions). During a spread spike, the bid can drop dramatically below the previous bid even if the mid price is unchanged — triggering long stop-losses on what looks like normal price action. This is one of the most insidious EA failure modes because it doesn't show up in mid-price charts; the stop trigger event is invisible in standard backtest data. - New entries: spread widening means that scalping EAs entering during a spike pay much more than their edge allows. A 2-pip-target scalper paying 5 pips of spread is mathematically losing per trade. - Order rejection: extreme spreads may exceed broker validity thresholds and cause new orders to reject with off-quote or invalid-price errors.
Mitigations: 1. Spread filter in EA: reject new entries if current spread exceeds a configurable threshold (e.g. 2× normal spread). 2. Avoid trading windows: configure EA to not trade in the 30 minutes around rollover and known major news releases. 3. Place stop-losses with buffer: for swing/position trades, place stops a few pips beyond the natural technical level to absorb spread spikes. 4. Use limit orders instead of market orders: avoids paying through the spread spike but risks missed fills. 5. Choose tight-spread ECN brokers: spread spikes are inevitable but their magnitude varies by broker.
Detection: log per-tick spread in your EA and review periods of extreme widening. Patterns typically emerge: same time daily (rollover), around scheduled news, during specific sessions.