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Understanding Bid and Ask Prices in Forex While Trading.

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Bid and Ask are common terms used in Forex trading and the financial markets in general. It refers to the price at which buyers and sellers in the market are willing to buy and sell. In other words, supply and demand indicate the price at which a currency pair can either sell or buy another asset  at the current time. 

The bid price 

The bid price is the price that the trader is willing to pay for the asset being traded. For example, if a trader wants to buy a currency pair,  the bid rate is the price they must pay. The bid price represents the highest price  a trader is willing to pay for the asset being traded. 

The ask price 

The selling price is the price that the trader is willing to receive for the sale of the traded asset. For example, if a trader wants to sell a currency pair,  the ask price is the price they get. The ask price represents the lowest price at which a trader is willing to sell the traded asset. 

The Current Price 

Understanding the current price is essential to understanding the difference between the asking price and the asking price. The current price, also known as the market value price, is the actual selling price of an asset on an exchange. It is the last traded price of that asset and is constantly fluctuating. The current price is determined by the market forces of supply and demand. Changes in supply or demand cause the current price to rise or fall. 

Bid and Ask Explained 

While the current price represents the market value of an asset, the bid and ask  represent the highest bid price and lowest ask price, respectively. The bid price is usually higher than the current price, while the ask price is usually lower than the current price .The ask price is always slightly higher than the bid price, as no investor will sell an asset at a price lower  than the bid price. 

The bid price represents the demand while the ask price represents the supply of the asset. The difference between the two is called the differential. When trading forex, the bid and ask rates apply to only one currency pair at a time.

For example, if you buy  EUR/USD,  it means you are buying the euro and selling the dollar. Buying a currency pair means selling the second currency (quote currency) in order to buy the first currency (base currency) in the pair. When trading forex, a rate for a EUR/USD currency pair can be $1.1250/$52. 

The first number represents the bid price of $1.1250 while the second number represents the ask price and the difference between the two is the spread value of 2 pips.

You can learn more about forex trading bid and ask price at forum.forex


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