what is a forex bid?
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If you trade the forex markets regularly, chances are that a lot of your trading is of the short-term variety; i. From my experience, there is one major flaw with this type of trading: h igh-speed computers and algorithms will spot these patterns faster than you ever will. When I initially started trading, my strategy was similar to that of many short-term traders. That is, analyze the technicals to decide on a long or short position or even no position in the absence of a clear trendand then wait for the all-important breakout, i. I can't tell you how many times I would open a position after a breakout, only for the price to move back in the opposite direction - with my stop loss closing me out of the trade. More often than not, the traders who make the money are those who are adept at anticipating such a breakout before it happens.

What is a forex bid? ln function in stata forex

What is a forex bid?

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It always has a value of one. But no worries, currency pairs are not very complex instruments and you can easily understand what is the bid and ask prices and what is a spread. When you are trading the foreign exchange markets, an exchange rate of a currency pair is simply the ratio of one currency valued against another currency.

Unlike other financial markets, currency pairs are traded in pairs, and each side of the exchange rate represents the national currency of a country or an economic zone. When buying, the exchange rate tells you how much you have to pay in units of the quoted currency to buy 1 unit of the second listed currency.

When selling, the exchange rate tells you how many units of the quoted currency you get for selling 1 unit of the base currency. Forex brokers that typically offer you a trading platform will quote you two prices for a currency pair: the bid price and ask price, which is known as the forex spread. But what is exactly the bid price and ask price or buy and sell price? In a foreign currency pair quote, the bid represents the price at which you can SELL the base currency. If you want to sell something, the forex broker or currency dealer will buy it from you at the bid price if you are using a market maker broker.

The ask is the market price in a currency trade at which you can BUY the base currency. If you want to buy something, the broker or other traders in the forex market will sell or offer it to you at the ask price. So, what is a forex spread? Very simple — It is the difference between the bid and the ask price that is called the spread. Generally, forex spreads are a crucial factor in forex trading as well as in selecting a good forex broker.

Forex brokers offer two types of forex spreads — variable or fixed. While fixed spreads stay constant at all times, variable forex spreads fluctuate when market conditions change and usually are a better solution for a day trader. Another factor to take into account is that a forex spread varies depending on the instrument you are trading and its liquidity. For that reason, many traders choose to trade major currency pairs to avoid a wider spread and to be able to easily get in and out of positions.

In conclusion, a forex spread is the primary transaction cost when you are involved in forex trading. This represents an indirect quotation since it expresses the amount of foreign currency USD per unit of domestic currency GBP.

When dealing with currency exchange rates, it's important to have an understanding of how currencies are quoted. Suppose there is a Canadian resident who is traveling to Europe and needs euros. The calculation would be different if both currencies were quoted in direct form.

In general, dealers in most countries will display exchange rates in direct form, or the amount of domestic currency required to buy one unit of a foreign currency. When dealing with cross currencies , first establish whether the two currencies in the transaction are generally quoted in direct form or indirect form. If both currencies are quoted in direct form, the approximate cross-currency rate would be calculated by dividing "Currency A" by "Currency B.

If one currency is quoted in direct form and the other in indirect form, the approximate cross-currency rate would be "Currency A" multiplied by "Currency B. When you calculate a currency rate, you can also establish the spread, or the difference between the bid and ask price for a currency. More importantly, you can determine how large the spread is.

If you decide to make the transaction, you can shop around for the best rate. Rates can vary between dealers in the same city. Spending a few minutes online comparing the various exchange rates can potentially save you 0. Airport kiosks have the worst exchange rates, with extremely wide bid-ask spreads. It may be preferable to carry a small amount of foreign currency for your immediate needs and exchange bigger amounts at banks or dealers in the city.

Some dealers will automatically improve the posted rate for larger amounts, but others may not do so unless you specifically request a rate improvement. If the spread is too wide, consider taking your business to another dealer.

Wide spreads are the bane of the retail currency exchange market. However, you can mitigate the impact of these wide spreads by researching the best rates, foregoing airport currency kiosks and asking for better rates for larger amounts. Your Money. Personal Finance. Your Practice. Popular Courses. Key Takeaways The bid-ask spread or the buy-sell spread is the difference between the amount a dealer is willing to sell a currency for versus how much they will buy it for.

Exchange rates vary by dealer, so it's important to research the best rate before exchanging any currency. Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation.

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What is the Bid and Ask price

The Bid price is. The bid-ask spread (or the buy-sell spread) is the difference between the amount a dealer is willing to sell a currency for versus how much they will buy it for. The BID represents the price at which the forex broker is willing to buy (from you) the base currency in exchange for the counter currency.