Pricing in the Forex market consists of the bid price and the ask price. Usually prices are in the brokers favor, as this is how he makes his money. The ask price will always be higher than the bid price, so when you trade on the Forex market, you end up buying high and selling higher.
If you want to purchase a currency pair, you will pay whatever the asking price is. For example, if you look at GBP/USD and you think that the pound will become stronger than the dollar, you would try to buy the pound at a lower rate and sell the dollar since you are predicting it will weaken as against the pound. The pound is considered as the "base currency" and will control the trade, which is called a long position.
The bid price is the price of the currency pair when you wish to sell or go short. Using the GBP/USD example, if you think the dollar will rebound and go higher against the pound, you would essentially be buying the dollar and selling the pound. The pound is the base currency and determines the direction of the trade.
Whenever you are buying the cross currency, or the one which is not controlling the trade, the USD in the GBP/USD pair, all signals will reverse. The price of the currency pair will decrease, which you would then sell to make a profit.
Calculations of the number of pips you earn over a short trade are the same as in a long trade to determine your actual profit. It is best to ignore the purchase or sale price and just figure out the difference between the higher number and the lower number, which will give you your gain or loss.
The spread is the difference between the bid and the ask price. This difference is the amount that the broker takes as his commission. Although the commission may seem low, this is actually how he makes his money; a very high volume of trades with smaller commissions over time will give a larger profit than a few trades with large commissions.
Spreads are very competitive. The smaller the spread, the more money you get to keep. Brokers try to keep their spreads small to attract customers. Spreads among the more commonly traded currency pairs are usually smaller than others. Trading among the commonly traded pairs is what is known as Sticking with the majors. - 16003
If you want to purchase a currency pair, you will pay whatever the asking price is. For example, if you look at GBP/USD and you think that the pound will become stronger than the dollar, you would try to buy the pound at a lower rate and sell the dollar since you are predicting it will weaken as against the pound. The pound is considered as the "base currency" and will control the trade, which is called a long position.
The bid price is the price of the currency pair when you wish to sell or go short. Using the GBP/USD example, if you think the dollar will rebound and go higher against the pound, you would essentially be buying the dollar and selling the pound. The pound is the base currency and determines the direction of the trade.
Whenever you are buying the cross currency, or the one which is not controlling the trade, the USD in the GBP/USD pair, all signals will reverse. The price of the currency pair will decrease, which you would then sell to make a profit.
Calculations of the number of pips you earn over a short trade are the same as in a long trade to determine your actual profit. It is best to ignore the purchase or sale price and just figure out the difference between the higher number and the lower number, which will give you your gain or loss.
The spread is the difference between the bid and the ask price. This difference is the amount that the broker takes as his commission. Although the commission may seem low, this is actually how he makes his money; a very high volume of trades with smaller commissions over time will give a larger profit than a few trades with large commissions.
Spreads are very competitive. The smaller the spread, the more money you get to keep. Brokers try to keep their spreads small to attract customers. Spreads among the more commonly traded currency pairs are usually smaller than others. Trading among the commonly traded pairs is what is known as Sticking with the majors. - 16003
About the Author:
We examined over 10 programs that require minimal knowledge and low investment. Our #1 pick for best product is a robot that, after a simple 5 minute download, amazingly does all the work and provides returns far in excess of 1000%! Skeptical? We were too. Look at the proof in the form of live streaming reports at The Forex Robot Information Page.
