Bid versus ask

Two prices in every quote

In the foreign exchange market every pair has two prices at once. The bid is the highest price a buyer is willing to pay for the pair, and the ask is the lowest price a seller is willing to accept. The bid is the price at which you can sell, and the ask is the price at which you can buy. The difference between them is the spread, and the spread is the cost of the transaction.

Why the spread matters

The bid and the ask move constantly with the supply and demand for the pair. When demand for a currency is high the ask rises, and when demand is low the ask falls.

The spread is a cost on every trade, so it decides how far price has to move before a trade is profitable. When you buy, you enter at the ask and exit at the bid, so price has to move in your favor by at least the spread before you are ahead. When you sell, you enter at the bid and exit at the ask, and the same distance applies in the other direction.

Different brokers quote different bid and ask prices for the same pair, so the spread varies from one broker to the next. Know your spread and build it into your strategy and your risk plan.

See it on the chart

The Trade Desk draws your entries and exits on the price itself, so the gap between where you clicked and where you were filled is visible on every trade, and a pair whose spread eats your edge shows up fast.