Forex ask vs bid price explained By http://www.forexblacklist.com
Introduction The bid and the ask price of forex trading is the most fundamental element of a trade which unfortunately, many new traders do not know much about. In order to understand the forex ask vs bid price element of a trade you will first need to know the meaning of both these terms. A bid price in the forex market is a rate at which the forex market is willing to buy a currency pair. This will be the price the trader will buy the base currency in. When you are looking at a quote for the bid price it often appears towards the left next to the currency's quote. So for instance if the EUR/USD pair was at 1.2334/50 the bid price, here is 1.2334, which means that you are selling the EUR for USD 1.2334.
The forex ask price explained The forex ask price is defined as the price point at which the forex market is willing to sell out a particular currency pair to buyers in the market. All traders will buy the currency pair at this price. The ask price will appear towards the right of a currency pair quote. So for instance if the EUR/ USD currency pair has 1.3344/48 then ask price here is 1.3344 and means that you are selling the EUR in the pair for 1.3344.
The bid / ask price spread The spread in the forex industry refers to the difference gap between the buy and the sell rate of a currency pair. This is what specifies the profit which is expected when online forex trading is taking place. The exact value of both the bid and the ask price is fixed in by the stock's liquidity. Stocks which are highly liquid mean that many units of the stock are being purchased and sold and so the overall bid and the ask price spread will be lowered. The majority of traders will prefer to invest in currency pairs with low bid and ask spreads owing to the fact that the money in this currency pair will not be wasted on the spread difference. A lower spread also means that traders can minimize their losses. When trading you should always make sure that you know the difference between both the bid and the ask price so that you know the spread prior to purchasing a currency pair from the forex market.
Whether you trade automatically or manually, you should always take spread into account. The problem is that many low quality trading tools don't do that. To discover which pieces of software you should rather stay away from, browse the Forex Blacklist at http://www.forexblacklist.com
Published on Nov 9, 2011
The bid and the ask price of forex trading is the most fundamental element of a trade which unfortunately, many new traders do not know much...