The “ask” price is also known as the “offer” price.
It’s the difference between the buyer’s and seller’s prices.
The “bid “represents demand and the “ask” represents supply for an asset.
In other words, it’s what the buyer is willing to pay for something versus what the seller is willing to get in order to sell it
The spread is the transaction cost.
“Market makers” buy at the bid price and sell at the ask price.
In forex trading, YOU are considered a price taker.
And your forex broker is the price maker, also known as a market maker.
- The BID represents the price at which the forex broker is willing to buy (from you) the base currency in exchange for the counter currency.
- The ASK price is the price at which the forex broker is willing to sell (to you) the base currency in exchange for the counter currency.
For you, the price taker, the SPREAD is the difference between the buy (ASK) and sell (BID) price.
A simple analogy is to pretend that you’re visiting a car dealer.
You see a car you like and inquire about the price.
The car dealer “asks” for $20,000.
Notice how the “ask price” is from the perspective of the car dealer.
This means that the car dealer is willing to sell you the car for $20,000.
Now let’s say you’re interested but would like to trade in your current vehicle, a truck.
The car dealer “bids” $5,000 for the truck.
Notice how the “bid price” is from the perspective of the car dealer.
This means that the car dealer is willing to buy the truck from you for $5,000.
If you think you can get a higher price for the truck, you’re free to get “bids” from other people as well.
If you liked this article, then please subscribe to our Newsletter Services for Forex Related updates. You can also find us on Facebook and can subscribe to our YouTube channel. You can also join our Telegram Channel for real-time trading analysis and discussion. Here is our service sitemap. If you have any confusion please leave your comments below.