Pricing in the Forex market consists of the bid price and the ask price. Usually prices are in the brokers favor, as this is how he makes his money. The ask price will always be higher than the bid price, so when you trade on the Forex market, you end up buying high and selling higher.
If you want to purchase currency pair, you have to pay the ask price. If, using the example of the GBP/USD you believe the pound is going to strengthen against the dollar, you would then be purchasing the pound at a lower rate and selling the dollar, which is going to weaken. The pound will be the base currency and will control the trade. This is called a long position.
The bid price is the price of the currency pair when you wish to sell or go short. Using the GBP/USD example, if you think the dollar will rebound and go higher against the pound, you would essentially be buying the dollar and selling the pound. The pound is the base currency and determines the direction of the trade.
Whenever you are buying the cross currency, or the one which is not controlling the trade, the USD in the GBP/USD pair, all signals will reverse. The price of the currency pair will decrease, which you would then sell to make a profit.
Calculations of the number of pips you earn over a short trade are the same as in a long trade to determine your actual profit. It is best to ignore the purchase or sale price and just figure out the difference between the higher number and the lower number, which will give you your gain or loss.
The spread is the difference between the bid price and ask price. This is the amount the broker will take as his commission. The broker makes money on the large volume of trades and not by charging large commissions.
Spreads can be quite competitively priced. When the spread is small, the trader will have more profit. Keeping the spread smaller helps the brokers to attract more traders. Spreads are usually tiny among the widely traded currency pairs, also referred to the majors.
If you want to purchase currency pair, you have to pay the ask price. If, using the example of the GBP/USD you believe the pound is going to strengthen against the dollar, you would then be purchasing the pound at a lower rate and selling the dollar, which is going to weaken. The pound will be the base currency and will control the trade. This is called a long position.
The bid price is the price of the currency pair when you wish to sell or go short. Using the GBP/USD example, if you think the dollar will rebound and go higher against the pound, you would essentially be buying the dollar and selling the pound. The pound is the base currency and determines the direction of the trade.
Whenever you are buying the cross currency, or the one which is not controlling the trade, the USD in the GBP/USD pair, all signals will reverse. The price of the currency pair will decrease, which you would then sell to make a profit.
Calculations of the number of pips you earn over a short trade are the same as in a long trade to determine your actual profit. It is best to ignore the purchase or sale price and just figure out the difference between the higher number and the lower number, which will give you your gain or loss.
The spread is the difference between the bid price and ask price. This is the amount the broker will take as his commission. The broker makes money on the large volume of trades and not by charging large commissions.
Spreads can be quite competitively priced. When the spread is small, the trader will have more profit. Keeping the spread smaller helps the brokers to attract more traders. Spreads are usually tiny among the widely traded currency pairs, also referred to the majors.
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