How spreads can affect profitability

Background: Forex brokers today typically do not charge commissions on trades, but earn only on the spread. In an efficient market you would expect spreads to be tight and fairly uniform. In forex this is anything but true. For example euro/dollar spreads can vary from two pips (0.02%) on the low end to seven-10 pips on the high end.

Compared with other instruments, this range may seem tight, and it is fair to ask if the range of spread on forex trades meaningfully affects profitability, and

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