Бид И Аск Форекс

The bid-ask spread (informally referred to as the buy-sell spread) is the difference between the price a dealer will buy and sell a currency. However, the spread, or the difference, between the bid and ask price for a currency in the retail market can be large, and may also vary significantly from one dealer to the next.

Understanding how exchange rates are calculated is the first step to understanding the impact of wide spreads in the foreign exchange market. In addition, it is always in your best interest to research the best exchange rate.

Bid-Ask Spreads in the Retail Forex Market

The bid price is what the dealer is willing to pay for a currency, while the ask price is the rate at which a dealer will sell the same currency.

For example, Ellen is an American traveler visiting Europe. The cost of purchasing euros at the airport is as follows:

• EUR 1 = USD / USD

The higher price (USD ) is the cost to buy each euro. Ellen wants to buy EUR 5,, and so would have to pay the dealer USD 7,

Suppose also that the next traveler in line has just returned from their European vacation and wants to sell the euros that they have left over. Katelyn has EUR 5, to sell. They can sell the euros at the bid price of USD (the lower price) and would receive USD 6, in exchange for their euros.

Because of the bid-ask spread, the kiosk dealer is able to make a profit of USD from this transaction (the difference between USD 7, and USD 6,).

When faced with a standard bid and ask price for a currency, the higher price is what you would pay to buy the currency and the lower price is what you would receive if you were to sell the currency.

Direct and Indirect Currency Quotes in Forex Markets

A direct currency quote, also known as a “price quotation,” is one that expresses the price of a unit of foreign currency in terms of the domestic currency. An indirect currency quote, also known as a “volume quotation,” is the opposite of a direct quote. An indirect currency quote expresses the amount of foreign currency per unit of domestic currency.

Most currencies are quoted in direct quote form (for example, USD/JPY, which refers to the amount of Japanese yen per one U.S. dollar). The currency to the left of the slash is called the base currency and the currency to the right of the slash is called, the counter currency, or quoted currency. 

Commonwealth Currencies

Commonwealth currencies such as the British pound and Australian dollar, as well as the euro, are generally quoted in indirect form (for example, GBP/USD and EUR/USD, which refer to the amount of US dollars per one British pound and per one euro).

Consider the Canadian dollar. In Canada, this quotation would take the form of USD 1 = CAD This represents a direct quotation, since it expresses the amount of domestic currency (CAD) per unit of the foreign currency (USD). The indirect form would be the reciprocal of the direct quote, or CAD 1 = USD

Next, consider the British pound. In the United Kingdom, this quotation would take the form of GBP 1= USD This represents an indirect quotation since it expresses the amount of foreign currency (USD) per unit of domestic currency (GBP). The direct form of this quote would be USD 1 = GBP

Understanding How Currencies are Quoted

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 exchange rates in the forex market are approximately USD 1 = CAD , and EUR 1 = USD That means the approximate EUR/CAD spot rate would be EUR 1 = CAD ( x ). A currency dealer in Canada might quote a rate of EUR 1 = CAD / , which means that you would pay Canadian dollars to buy one euro and would receive Canadian dollars if you sold one euro.

The calculation would be different if both currencies were quoted in direct form. If the approximate spot rate for the Japanese yen is USD 1 = JPY , this is how you would calculate the price of yen in Canadian dollars:

• USD 1 = CAD and USD 1 = JPY

Thus:

• CAD = JPY , or CAD 1 = JPY ( / )

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.

How to Calculate Cross-Currency Rates

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.

Exchange Rates Vary by Dealer

Rates can vary between dealers in the same city. Spending a few minutes online comparing the various exchange rates can potentially save you % or 1%.

Airport kiosks have the worst exchange rates, with extremely wide bid-ask spreads. It's possible to receive 5% less of the currency you are buying. 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 you haven’t had the time to shop around for the best rates, research ahead of time so you have an idea of the spot exchange rate and understand the spread. If the spread is too wide, consider taking your business to another dealer.

The Bottom Line

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.

As we know, the Forex market is the largest and most liquid financial market in the world. It is where individuals, corporations, and governments buy and sell currencies. When trading currencies in the forex market, two prices are always quoted: the Bid price and the Ask price. 

Those two prices form the basis of all transactions, and they are what determine how much a currency pair is worth at any given time.

In this article, we will explain what Bid and Ask prices are and provide examples to help you understand their importance in forex trading.

What is the Bid Price?

The Bid price is the price at which a broker is willing to buy a currency pair from a trader. In other words, it is the highest price that a buyer is willing to pay for a particular currency at a given time. The Bid price is always lower than the Ask price, and the difference between the two is known as the spread.

As of the writing of this article, the current Bid price for the EUR/USD currency pair is , while the Ask price is This means that buyers are willing to buy one euro for US dollars, while sellers are willing to sell one euro for US dollars. The spread between the Bid and Ask price is pips.

What is the Ask Price?

The Ask price, also known as the offer price, is the price at which a broker is willing to sell a currency pair to a trader. In other words, it is the lowest price that a seller is willing to accept for a particular currency at a given time. The Ask price is always higher than the Bid price, and the difference between the two is known as the spread.

Using the same example as before, if a trader wants to buy one euro, he/she would have to pay U.S. dollars. This is the Ask price. Similarly, if a trader wants to sell one euro, he/she would receive U.S. dollars, which is the Bid price. The spread of pips represents the cost of the transaction.

Why is Bid and Ask Prices Important in Forex Trading?

Being a forex trader, you will need to know the Bid and Ask prices to determine the best time to enter or exit a trade. 

For example, if you want to buy the EUR/USD currency pair, you will need to enter a buy order at the Ask price, which is the price at which sellers are willing to sell the currency pair. Similarly, if you want to sell the EUR/USD currency pair, you will need to enter a sell order at the Bid price, which is the price at which buyers are willing to buy the currency pair.

Bid and Ask prices play a role in Managing Risk as well.

For example, if a trader has a long position in the EUR/USD currency pair, they may want to place a stop-loss order below the current Bid price of to limit their potential losses. Conversely, if a trader has a short position in the EUR/USD currency pair, they may want to place a stop-loss order above the current Ask price of to limit their potential losses. This is done because the current spread, which needs to be accounted as well.

Understanding Bid and Ask prices is crucial for forex traders, as it helps them make informed decisions when entering or exiting a trade and maximize their profits while minimizing their risks.

* The information provided here has been prepared by Eightcap’s team of analysts. All expressions of opinion are subject to change without notice. Any opinions made may be personal to the author and do not reflect the opinions of Eightcap.
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