When trading you will actually find two prices per currency pair – the bid and the ask. Of course they will be displayed in 4 or 5 digits depending on your broker. Lets explain what they mean which can be a bit confusing for some people, and then I tell you how I remember them.
The Bid price – Sell
The Bid is the price a seller pays for in any currency pair.
The Bid is the price a seller pays for in any currency pair.
The Ask Price – Buy
The ask is the price a buyer pays for in any currency pair.
The ask is the price a buyer pays for in any currency pair.
A price quotation in Forex means the display of Bid / Ask prices. For example EUR/USD can be 1.2874 / 1.2876. The bid price is 1.2874 while the Ask price is 1.2876. Of course the prices change nearly every second!
How we can remember these confusing words?
Assuming that you want to sell the currency, you take the Bid price. So the price at which you enter the trade will be the Bid price.
Assuming that you want to sell the currency, you take the Bid price. So the price at which you enter the trade will be the Bid price.
If you want to buy the currency, you take the Ask price. So the price at which you enter the trade will be the Ask price.
Why the prices are difference? Why the discrepancy between the Bid / Ask price? That is called the spread – the broker profit! We will explain that spread in the next lesson!
