This means more brokers, and that means more competitions between them. Join thousands of traders who choose a mobile-first broker for trading the markets. Derivative products are leveraged products and can result in losses that exceed initial deposits. Here are ways to minimize them. Bid-ask spreads represent a cost that is not always apparent to novice investors. Of course everything is quoted with the latest market prices. The spread becomes more important to traders who trade frequently, such as an intraday traders or scalpers.
A Forex asking price is the price at which the market is ready to sell a certain Forex Trading currency pair in the online Forex market. This is the price that the trader buys in. It appears to the right of the Forex quote. For example, in the same EUR/USD pair of /47, the ask price us
BREAKING DOWN 'Bid and Ask'
In general, the smaller the spread, the better the liquidity. The average investor contends with the bid and ask spread as an implied cost of trading. The bid-ask spread works to the advantage of the market maker. The spread represents the market maker's profit. Bid-ask spreads can vary widely, depending on the security and the market.
Blue-chip companies that constitute the Dow Jones Industrial Average may have a bid-ask spread of only a few cents, while a small-cap stock may have a bid-ask spread of 50 cents or more.
The bid-ask spread can widen dramatically during periods of illiquidity or market turmoil, since traders will not be willing to pay a price beyond a certain threshold, and sellers may not be willing to accept prices below a certain level.
The ask is the price a seller is willing to accept for a security. The current Bid Ask Spread is Heavily traded forex pairs will typically have a Bid Ask Spread of 2 pips or less with most brokers. In figure 2 the spread is less than half a pip. Be frugal and try to get the best price whenever possible. Most forex brokers, although not all, require that you pay the spread when entering and exiting a position.
Think of the Bid Ask Spread as a hidden trading cost. My broker allows me to put any of the 4 options on my chart, but I am not sure which to choose?
Hi Diana, thanks very much. That's a good question and I've never come accross this before. I believe there is only one bid and ask price at any given time. Your broker might be defining the 4 data points of a candle in bid and ask prices. If that's the case you need to chose the 'close ask' price for your targets. The close price of a candle is the current or closing price of a candlestick.
It might be a good idea to contact your broker and double check though. It is a fantastic way to see the cost of the spread on the intra day charts. How do I exit since price always rolls? The bid and ask are just different quote prices from your broker. The bid is the market price, the ask price is a price that includes your broker's spread. The ask price is invisible, unless you tell your charting software to display it. All you need to do is add the spread to the bid price to get the ask price when considering trade entry,exit and stop levels.
This was very helpful to me. I assume this is correct? Also how do you work out the variable spread some brokers charge? And, are there any other fees or charges or commissions some brokers may charge?
Thanks for your help and for the email updates. With variable spreads, the broker's system will re quote ask prices on each price change to reflect what is available to them on the inter bank market at that current price. The disadvantage is during high volatile events where liquidity dries up, like NFP or central bank policy updates - where the ask prices become very expensive.
Hi Forex Guy, Great article. It helps a lot. I am working with Metatrader and have 1 question. This would mean that my order will be triggered since that's the bid price. Logically I would have to be breakeven when the chart is right on 1. I would only have to pay the spread when I buy back. I am confused now.. You enter with the bid price, which is what you see on the chart.
But, you exit at the ask price - which is the broker's price that contains their commission markup. That's why when you open the trade it is in the negative strait away. All brokers should be required by law to have this video and article posted on their site. Thanks very clear and easy to follow as always. I have been calculating for spread for a while since I've seen you talk about it on one of your videos. Its a same that MT4 doesn't show the ask price or positions the buy and sell off the ask, if that is what they really are going by.
They really need to fix that 'glitch'. What is the formula for bid price and also in ask price? Bid price is what you see on the chart, ask price is whatever the broker sets, which is usually a few pips higher than the bid. In over a year of intensive study of Forex, I have not seen this very important simple and basic principle spelled out nearly as clearly as this!
The term "bid and ask" refers to a two-way price quotation that indicates the best price at which a security can be sold and bought at a given point in time. In forex, a spread is the difference between the bid and ask prices. Explore examples on how bid/ask spreads work and learn how to trade with ThinkMarkets. The Forex bid ask spread is similar to every other financial market. It's simply the difference between the price at which a currency pair can be bought.