U.S. Dollar / Canadian DollarEducation
Bid and Ask Explained
Do you know what Bid or Ask means? If you’re a trader, you should keep reading if these terms sound unfamiliar to you, or you are unsure. After all, they are the terms used to explain the buying and selling process within markets.
Let’s get started! When you look at a tradable financial market, you'll notice two prices listed: the bid and the ask. Here's a quick guide to help you understand these core concepts:
1. Bid: the price at which you can sell (this is the price where someone is “bidding” to buy it at).
2. Ask: the price at which you can buy (this is the price where someone is “asking” to sell it at).
The bid price is always lower than the ask price. This is just Business 101, as buyers are trying to get a better deal than sellers. So, they bid lower than the ask.
What is Spread?
The spread is the difference between the bid and the ask prices. It's essential for calculating your potential profit or loss from a trade.
Example: If EUR/USD is trading at 1.1259, the bid might be 1.1257 and the ask 1.1260. To buy EUR/USD, you would enter at 1.1260. For any profit, the bid price must rise above 1.1261. If EUR/USD moves up two pips to 1.1261 but the bid remains at 1.1259, you would break even.
Understanding these basics can help you make more informed trading decisions. Happy trading!
Did you learn something new?
Our team of researchers and market specialists will be sharing more educational content so be sure to follow our TradingView account for instant updates. Also, be sure to check out our latest ideas here.
- FOREX.com Team
Let’s get started! When you look at a tradable financial market, you'll notice two prices listed: the bid and the ask. Here's a quick guide to help you understand these core concepts:
1. Bid: the price at which you can sell (this is the price where someone is “bidding” to buy it at).
2. Ask: the price at which you can buy (this is the price where someone is “asking” to sell it at).
The bid price is always lower than the ask price. This is just Business 101, as buyers are trying to get a better deal than sellers. So, they bid lower than the ask.
What is Spread?
The spread is the difference between the bid and the ask prices. It's essential for calculating your potential profit or loss from a trade.
Example: If EUR/USD is trading at 1.1259, the bid might be 1.1257 and the ask 1.1260. To buy EUR/USD, you would enter at 1.1260. For any profit, the bid price must rise above 1.1261. If EUR/USD moves up two pips to 1.1261 but the bid remains at 1.1259, you would break even.
Understanding these basics can help you make more informed trading decisions. Happy trading!
Did you learn something new?
Our team of researchers and market specialists will be sharing more educational content so be sure to follow our TradingView account for instant updates. Also, be sure to check out our latest ideas here.
- FOREX.com Team
Disclaimer
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