Ask price bid price forex

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Though the dealer would want to maximize his profit, setting the asking price high as possible, he will find it difficult to find a buyer for currency if the price is much higher than the market rate. The bid price indicates the transaction cost that a person will incur if they purchase a currency and sell it immediately.

The bid and ask price will also depend on the economy of the country, financial stability. In some countries, the inflation rates are high, and the currency value is decreasing rapidly. Hence if they are investing in this currency, they will usually keep the asking price higher. Spread The difference between the bid and the asking price for a particular currency pair is called the forex spread or bid-ask spread.

Who Benefits from the Bid-Ask Spread? Then only one who has benefited from the Bid-Ask spread is the market maker. That means the broker you are trading with. If the spread is wider the broker will make more money on each trade you open. So they are trying to widen the spread as much as possible. But, they need to be careful because if the spread is too large then the traders will avoid trading that currency pair.

Because the cost of the spread is too expensive. Below is an image with high spread which makes the pair expensive for trading. The broker tends to lower the spread as much as possible to attract more traders who are willing to trade and with more traders they will make more money. More trading at the end will cover small spreads where they make more money.

Bid-Ask Spread Costs Here is an example of how they make money. If you increase the spread to 2 pips then the broker will make 2x time more. Your job is to find a broker that has an acceptable spread cost and that means less than 1 pip which will make trading less expensive. The other way to lower the spread cost is to find and select currency pair that is traded often because they have the lowest spread. Those are currency pairs that are more liquid.

Bid and Ask price close together means lower spread and lower cost for trading. But, one more thing is good to know when the Bid and Ask price are close together or wide. In case when the bid and ask price are close it means the currency pair is liquid and it is easy to get out from a trade. The difference is only 0. When you enter into the trade you can expect the price will move and if it moves in your direction you will make money. You will not need to wait days until the price reaches your entry price.

And the cost of 0. That is when the price does not move enough to reach the desired price when selling or buying. In the example below you see the price of bid and ask price is wide and it has 82 pips of spread. Imagine how to get out of that trade if you open an order. You would need to wait a long time until the price reaches your entry price and then wait until it moves in your direction. That is why it is important to have the currency pair with bid and ask price close together.

Should you buy at bid or ask price is not open for discussion because the market defines the entry price. You buy at the Ask price which is defined by the market. If the price does not fit your requirements then you can wait until the price falls down to the price you are willing to pay. The same is for selling at bid price. You can sell at Ask price which is determined by the market. If the Bid price is not acceptable for you then you can wait until the price rises in value and then you sell at the higher bid price.

What is Best Bid and Best Ask? If you wonder what is the best bid and what is the best ask price then it all depends on you. If you are satisfied with the price you see on the chart then those are best bid and ask prices. But, there is one more thing you can use to filter and get the best bid and ask price. If you want to buy at the Ask price you should wait until the price of a currency pair falls down.

That way you will enter into the trade with the best possible price and where you expect the price to rise in value. If you want to sell at the bid price then you should wait until the price of a currency pair rises in value. Then you can open a sell order at the top of the market where you expect the price will fall down. Conclusion At the end what is good to know about bid and ask price is that they define what price you will pay if you want to buy or sell a currency pair.

The one whom you are trading with is the market maker, broker or other participants on the market. If they are willing to buy or sell currency pairs from you then you will make a trade. Your goal is to find the currency pair with lowest spread and that means with the lowest difference between bid and ask price.