For Business

Market Basics

What Is the Bid and the Ask

A currency pair has two prices at every moment: the bid, which you sell at, and the ask, which you buy at. This paper shows you which price fills each order you can send, how the two prices work through one real day traded as a buy and as a sell, where the two prices come from, why the chart on your screen is drawn from only one of them, and how to put both on your own chart.

Difficulty
Beginner
Reading time
6 min
Pages
8
Reviewed by
Saman Rahbar

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Two voices, two prices

A currency pair does not have a price. It has two at every moment, and which one you meet depends on what you are trying to do. The bid is what a buyer out there is bidding, so it is the price at which you can sell. The ask is what a seller out there is asking, so it is the price at which you can buy. The bid is always the lower of the two, which means you meet the worse price in both directions. The gap between them is the spread.

That is the whole mechanical answer, and it is worth saying out loud once. Opening a long — a trade that makes money if the price rises — buys at the ask, and closing it sells at the bid. Opening a short — a trade that makes money if the price falls — sells at the bid, and closing it buys at the ask. Opening and closing always use opposite prices.

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