Understanding Forex Trading Bid and Ask Prices
What is Bid and Ask prices? and what is Spread? The Forex bid & ask spread represents the difference between the purchase and the sale rates. This signifies the expected profit of the online Forex Trading transaction. The value of Bid/Ask Spread is set by the liquidity of a stock. If the stock is highly liquid, it means many stock units are being bought and sold, and the Forex bid/ask spread will be lower.
Forex Trading Bid price is the price at which the market is prepared to buy a specific currency pair in the Forex trading market. In the quote, the Forex bid price appears to the left of the currency quote. This is the price that the trader of Forex buys his base currency in. Example, If the GBP/USD pair is 1.9785/88, then the bid price is 1.9785. Meaning you can sell the GBP for 1.9788 USD.
Then what is Ask price? A Forex ask price is the price at which the market is ready to sell a certain Forex Trading currency pair in the online Forex market. This is the price that the trader buys in. It appears to the right of the Forex quote. For example, in the same GBP/USD pair of 1.9785/88, the ask price us 1.9788. This means you can buy one GBP for 1.9785 USD.
We better look for a lower bid/ask spread, because it means their money pair only for the currency and is not wasted on the bid/ask spread difference. Many brokers now offering a very competitive spread start from 2 pips spread for EUR/USD and 3 pips for GBP/USD. The lower spread you have then the more flexible strategy will work on your trade and it will usefull when you need to cut down your loss.
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