For instance, if a trader wants to sell a currency pair, then the ask price is the price he will get. The ask price represents the lowest price that a trader is willing to sell the traded asset for. Understanding the current price is essential to understand the difference between the bid price and the ask price. The current price, also known as the market value, 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 to either supply or demand make the current price rise or fall. While the current price represents the market value of an asset, the bid and ask prices represent the maximum buying and minimum selling price respectively. The bid price is usually higher than the current price, while the ask price is normally lower than the current price. The ask price is always a little higher than the bid price, based on the fact that no investor will sell an asset for a lower price than the bidding price.

The bid price represents the demand while the ask price represents the supply of the asset. The difference between both is known as the spread. In forex trading , bid and ask prices are both applied to a single currency pair at the same time. Buying a currency pair means selling the second currency quote currency to buy the first currency base currency in the pair.

Bid-ask spread is the difference between bid price and ask price of an asset. The difference between the two prices defines the spread. The larger the gap, the higher the spread. Spread values can be very small in a high liquidity market, but when the market is less liquid, spreads will be wider. Both the bid and ask prices are displayed in real-time on the trading platform and are constantly updating. The variable difference between the two prices is a key indicator of the liquidity of the market and how much the transaction costs.

High liquidity enables traders to buy and sell closer to the market value price. Be careful and try to get the best price whenever possible.

Most forex brokers require that you pay the spread when entering and exiting a position. The bid-ask spread is considered as a hidden trading cost.

It can work against you, but it can work for you only if you pick your entry points carefully. The bid price is the buying price that buyers offer for an asset. Usually, traders tend to buy assets as cheaply as possible and achieve a large bid-ask spread through higher ask and lower bid prices. While an ask price is the selling price offered by sellers for an asset. They usually want to sell their assets as expensive as possible.

With AximTrade, enjoy a low spread from zero to 1 pip on all majors. In addition to easy access to real-time pricing of the forex market and quoted buy and sell prices for a number of instruments via our online platform. Experience the freedom to decide at which price you want to buy or sell, and execute the transaction at any time. The most important thing to remember is that the bid price is used for selling while the ask price is used when buying.

At the end of the day all of these intricacies are taken care of for you by your broker. All you need to know is whether you want to go short sell or go long buy and your broker does the rest. While the major currency pairs and even some crosses have decent spreads, some of the more exotic currency pairs can have wide spreads, creating a large deficit as soon as you enter a trade. The currency pairs with the lowest spreads are those with the largest daily volume.

These currency pairs typically have the lowest spreads, with EURUSD, GBPUSD and USDJPY being the lowest of them all. Compare this to the day trader who can make dozens of trades in a single day and may only be in a trade for a matter of minutes. Make no mistake though, the spread on some of the less-liquid currency pairs can be significant and should certainly be considered before taking a trade, even when trading the higher time frames. We all know that the Forex market is a global market consisting of different trading sessions.

These sessions are:. The bid ask spread for a currency pair can vary depending on the current trading session. For the most part the bid ask spread will be the lowest during the London and New York sessions as these carry the largest trading volume.

However there is a three hour window that occurs immediately after the New York session closes and before Tokyo opens in which the spreads can considerable. This is especially true for some of the currency crosses and exotic currency pairs but can also effect the major currency pairs. In fact as a general rule you should always check the bid ask spread before entering a trade regardless of the current trading session. Before we close out this lesson, here are a few key points to keep in mind when it comes to the bid ask spread.

Like any financial market the Forex market has a bid ask spread. This is simply the difference between the price at which a currency pair can be bought and sold. Bid Price — Used when selling a currency pair. It reflects how much of the quoted currency will be obtained if buying one unit of the base currency. Ask Price -Used when buying a currency pair.

It reflects the amount of quoted currency that has to be paid in order to buy one unit of the base currency. Remember from the lesson on Forex currency pairs that the base currency is the one in front while the quote currency is the second. So using the example of EURUSD, the Euro is the base currency and the US Dollar is the quote currency. The most important thing to remember is that the bid price is used for selling while the ask price is used when buying.

At the end of the day all of these intricacies are taken care of for you by your broker. All you need to know is whether you want to go short sell or go long buy and your broker does the rest. While the major currency pairs and even some crosses have decent spreads, some of the more exotic currency pairs can have wide spreads, creating a large deficit as soon as you enter a trade. The currency pairs with the lowest spreads are those with the largest daily volume. These currency pairs typically have the lowest spreads, with EURUSD, GBPUSD and USDJPY being the lowest of them all.

Compare this to the day trader who can make dozens of trades in a single day and may only be in a trade for a matter of minutes. Make no mistake though, the spread on some of the less-liquid currency pairs can be significant and should certainly be considered before taking a trade, even when trading the higher time frames. We all know that the Forex market is a global market consisting of different trading sessions.

These sessions are:. The bid ask spread for a currency pair can vary depending on the current trading session. For the most part the bid ask spread will be the lowest during the London and New York sessions as these carry the largest trading volume. However there is a three hour window that occurs immediately after the New York session closes and before Tokyo opens in which the spreads can considerable.

This is especially true for some of the currency crosses and exotic currency pairs but can also effect the major currency pairs. In fact as a general rule you should always check the bid ask spread before entering a trade regardless of the current trading session.

Before we close out this lesson, here are a few key points to keep in mind when it comes to the bid ask spread. I hope this lesson has helped you to better understand the Forex bid ask spread as well as when to take extra care and watch for larger-than-usual spreads. The spread is the difference between the bid and the ask price.

In Forex, that spread is represented by pips. What Is the Bid and Ask in Forex? What is the bid in Forex? The bid is the price buyers are willing to pay for a market. What is the ask in Forex? The ask is the price sellers are willing to take for it. What is the spread in Forex?

In forex trading , bid and ask prices are both applied to a single currency pair at the same time. The bid price represents the demand while the ask price represents the supply of the asset. Copyright © Trading Orders The Basics of the Bid-Ask Spread. Working a typical 9-to-5 job, say, means putting in 40 hours and earning a paycheck.

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