Long and Short Positions
Knowing When To Buy Or Sell A Currency Pair
The price for currency pairs, also known as a “forex quote” is quoted with 2 prices: the bid and the ask price.
The forex quote will look something like this:
Both of these prices are given in real-time and will be constantly updated.
The ask price will almost always be higher than the bid price. The difference between these 2 prices is known as the spread. More on this later.
What is the “Bid” Price?
The Bid price is the price that a forex trader would sell a currency pair for.
This means that the bid price is the best available price that you (the trader) can sell to the market.
If you want to exit a trade (sell your currency pair), the broker will buy the pair from you at the bid price.
Just remember: You (the trader) sell at the bid price.
What is the “Ask” Price?
Ask price is the price that a trader is willing to buy a currency pair for.
This means that the ask price is the best available price that you (the trader) can buy from the market
If you want to enter a trade (buy a currency pair), the broker will sell it to you at the ask price.
Just remember: You (the trader) buy at the ask price.
What is the “spread”?
The difference between the bid and the ask price is known as the SPREAD.
The spread is what buyers are willing to pay for something versus what the sellers are willing to accept in order to sell it.
Let’s work out the spread using the EUR/USD example above. We know now that the spread is the difference between the ask and the bid price.
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