he first thing to notice position.
about currency prices in
The bid price is the exact
the Forex market is that opposite: it’s what you pay
there are two of them, called the should you wish to sell, or
bid price and the ask price. The short, that currency pair. To
second thing to notice is that continue the example of the
they don’t favor you, the trader; GBP/USD, let’s say you believe
they favor the broker, because the U.S. dollar is going to
that’s how he makes his money. strengthen against the pound,
The ask price is what you pay rather than the other way around.
should you wish to purchase that In this trade, you would be
currency pair. Using the GBP/USD purchasing the dollar now (and
as an example, let’s say you selling the pound) in order to
believe the pound is going to sell it later.
strengthen against the U.S.
But remember, it’s the base
dollar, meaning that the chart of currency that controls the
the two currencies is going to go direction of the trade. When you
up on the graph.
purchase the cross currency, by
In such a trade you would be definition you’re selling the
purchasing the pound now at a base; in other words, you’re
lower rate (and by definition, selling the currency pair rather
selling the dollar) so that you than buying it. So all the
can sell it later at its signals are reversed: the chart
(hopefully) higher rate. And, will go down on the graph and the
since the pound is the base price of the currency pair will
currency and it controls the decrease.
direction of the trade, to
But because you sold or
purchase the pound means to shorted the currency pair rather
purchase the currency pair. Such than purchased it, you want the
a trade is called opening a long price to decrease, because it’s
the price of the base currency spread, the more money you get to
that’s going down while the price keep out of what you make.
of the cross is going up. In our Spreads are competitive among
example, if you shorted the brokers; keeping their spreads
GBP/USD, you would earn a profit small is one means of attracting
if the price of the pair went customers. And spreads among the
down. most popular currency pairs are
Calculating the number of pips generally smaller than those for
you earn in a short trade is the pairs that aren’t as commonly
same as for a long trade. Just traded, which is one of the best
ignore which was the purchase or reasons for sticking with the
the sale price, and subtract the “majors,” as they’re called.
lower number from the higher one.
The difference is the amount of
your gain.
Note that the ask price is always higher than the bid. You type="text/javascript">
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