Bid/Ask and Spread

Whenever you open a ticket on a currency pair, you will notice that there are two prices shown, just like in the picture below:

Forex 101 - Bid Ask Spread

The lower price (1.23480 in our example) is called “Bid” and it is the price your broker is willing to pay for buying the base currency (EUR in our example) in exchange for the counter currency (USD in our case). In other words, if you want to open a short trade (Sell), you will do so at the price of 1.23480 in our example. The higher price (1.23492 in the example) is called “Ask” and it is the price at which the broker is willing to sell you the base currency (EUR) against the counter currency (USD).

In other words, if you want to open a long trade (Buy), you will do so at the price of 1.23492 in our example. You notice of course that there is a difference between the Bid and Ask. That is called the Spread and you will pay that spread on every transaction you open. This is one way for the brokers to gain money in exchange for facilitating you the access to the market. Remember: if you Sell EUR/USD (or other pair) you will do so using the Bid. If you Buy EUR/USD (or other pair), you will do so using the Ask. The difference between Bid and Ask is called Spread.