Bid / Ask

In forex trading, every currency pair is quoted with two prices simultaneously: the Bid price and the Ask price. The Bid price represents the rate at which a trader can sell the pair, while the Ask price represents the rate at which they can buy it.

The Ask price is always slightly higher than the Bid price, and the difference between them is known as the spread. This is one of the primary sources brokerages rely on to cover execution costs and provide liquidity.

When opening a buy position, execution occurs at the Ask price, whereas opening a sell position executes at the Bid price. This means any trade effectively begins with a slight loss equal to the spread before the market moves in the trader's favor.

The gap between the Bid and Ask prices fluctuates according to market liquidity and volatility; it narrows during periods of high liquidity, such as overlapping sessions, and widens during times of low liquidity or major economic news releases.

A common mistake among beginners is confusing the two prices when analyzing charts, or ignoring the impact of a widening spread on trade entry costs during periods of severe volatility.