What Are Bid and Ask Prices – Explanation
Before you start trading on real market conditions, it is time to understand what are Bid and Ask prices in Forex. This is one of the very basic concepts you just have to be familiar with. The Bid and Ask prices are quotes of a traded asset that reflect the best available buying and selling prices at a given time. The bid price usually appears on the left and represents the highest price that buyers are willing to pay. The ask price represents the lowest price that sellers are willing to receive.
The difference between the Bid and Ask prices is measured by pips and is called Spread. What you need to know about it now, is that the lower the Spread (difference), the better the liquidity is, and the better it is for you as a trader.
In order to better understand the concept of spread read – What is Spread in Forex.
Note that in most trading platforms, the price shown on the chart refers to the bid – selling price, while the ask price will appear only on the quoted table.
For Example let’s say that we decide to trade on the EUR/USD currency pair. When we look at its current prices, we can see two different prices: The bid price, which is also the sellers price, and is currently quoted at 1.3050, and the ask price, which is also the buyers price, and is currently quoted at 1.3052. As you can understand, the price of the EUR/USD will be different depending on our decision whether to buy or sell this currency pair. The difference between the bid and the ask in this example is of 2 pips, which also defines the currency pair spread. If you are still don’t feel confident enough about what are Bid and Ask prices, Practice it on a demo until you get use to it. so you wont get confused!
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