Bids and offers
When you’re in front of your screen and looking at an online forex broker’s trading platform, you’ll see two prices for each currency pair. The price on the left-hand side is called the bid and the price on the right-hand side is called the offer (some call this the ask). The “bid” is the price at which you can sell the base currency. The “offer” is the price at which you can buy the base currency.
Some brokers display the prices above and below each other, with the bid on the bottom and the offer on top. The easy way to tell the difference is that the bid price is always lower than the offer price.
The price quotation of each bid and offer you see will have two components: the big figure and the dealing price. The big figure refers to the first three digits of the overall currency rate and is usually shown in a smaller font size or even in shadow. The dealing price refers to the last two digits of the overall currency price and is brightly displayed in a larger font size.
Spreads
A spread is the difference between the bid price and the offer price. Most online forex brokers utilize spread-based trading platforms for individual traders. Look at the spread as the compensation the broker receives for being the market-maker and executing your trade.
Spreads vary from broker to broker and by currency pairs at each broker as well. Generally, the more liquid the currency pair, the narrower the spread; the less liquid the currency pair, the wider the spread. This is especially the case for some of the less-traded crosses.
Buy this book : Currency Trading For Dummies
