![]() Spreads in stock trading are typically much higher than spreads in forex trading. The lower, or tighter, the forex spread, the more liquid a market is said to be and the lower the implied cost of trading. In the above example, the forex spread is 1.1751 – 1.1749 = 0.0002, or 2 pips. The difference between the bid and ask prices is known as the forex spread. So, if you buy €1, you will need to pay US$1.1751. The second figure (to the right) is known as the ask price and represents the minimum price at which the market is willing to sell the US dollar. So, if you sell €1, you will receive US$1.1749. The first figure (to the left) is known as the bid price and represents the maximum price at which the market is willing to buy the US dollar. For instance, the EUR/USD exchange rate may be displayed like this: 1.1749 / 51 or 1.1749 / 1.1751. ![]() You may notice, however, that in forex trading, price quotes on trading platforms are showed with two rates not just one. If for example, the EUR/USD is 1.1749, it means €1 can be exchanged for US$1.1749. In other words, it represents the number of US dollars you can exchange for €1. For instance, EUR/USD would be the price of a Euro expressed in terms of the US dollar. The price of a currency is always quoted in terms of another currency. To understand what is forex, you may first need to open a demo account and understand the concept of currency exchange rates. Currency Exchange Rates: Bid, Ask and Spread There are certain forex trading concepts you should be familiar with to understand the dynamics of this unique market, identify opportunities and trade successfully. Like most specialised industries, forex trading comes with its own jargon and set of terms. ![]() If you want a quick but comprehensive understanding of what is forex, how the market works and why it’s important to open a demo account, then read our comprehensive guide on how to trade forex. The massive growth of the currency market has seen many traders jump in before they’ve taken the time to learn to trade forex and this can be a mistake. Learn to Trade Forex With benefits like 24-hours trading, high liquidity and low transaction costs, the foreign exchange market, or forex market, attracts experienced and novice traders alike. ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |