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When traders want to place an order on the Forex market they should know the currency pair as well as the price of this pair. Forex market price of the currency pair is denoted by two symbols Ask and Bid, which have the specific digital notations.
Ask price is the highest price in the pair’s quotation, at which a trader buys the currency standing first in the abbreviation of the currency pair. Consequently, a trader sells the currency standing second.
Bid price is the lowest price in the quotation of the currency pair, at which a trader sells the currency standing first in the abbreviation of the currency pair. Respectively, a trader buys the currency standing second.
Let’s consider an example:
We have the currency pair EUR/USD with the quotation 1.3652/1.3655. This means that you can buy 1 euro for 1.3655 dollars or to sell 1 euro for 1.3652 dollars. The difference between Bid price and Ask price is called spread. Spread is a payment for the opportunity to trade on the Forex market, so-called commission of the brokerage firm. Spreads are very small on the exchange market; they are ten or even hundred times smaller than the banks' spread. For the most part of the major currency pairs spreads amount to 3 points.
