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What Is A Bid Price - Bid Price Definition

2019-07-08 17:46    forextraders

Bid Price Definition – The Bid Price is the price at which the forex market, represented by your broker/dealer, is prepared to buy a specific currency in a Foreign Exchange Contract or Cross Currency Contract. Dealing in currencies can be confusing at the start because you must always deal with a currency pair. The first currency in the pair is the “Base” currency. The second currency in the pair is labeled the “Quote” currency or “Counter” currency. A quotation then defines how many units of the counter currency are needed to buy one unit of the base currency. The quotation of a currency pair usually consists of two prices, much as with stocks traded on an exchange. The “Bid”, usually lower than the “Ask”, is the price at which a market maker or a broker is willing to buy the base currency in exchange for the quote currency. Ask or Offer, usually higher than Bid, is the price at which a broker is willing to sell the base currency in exchange for the quote currency. If the Bid price for a EUR/USD pair is 1.2750 and the Offer price is 1.2752, the difference, 2 “pips” in forex trader slang, is referred to as the “spread”. The quote is usually in the form of “1.2750/52” or even abbreviated to form “50/52”. Most forex brokers derive their trading profits from the spread, so it is beneficial to review broker spreads before transacting trades. In this example you would pay $1.2752 to acquire one Euro.

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