Forex Spread: What Does Spread Mean in Trading? | FP Markets скачать в хорошем качестве

Forex Spread: What Does Spread Mean in Trading? | FP Markets

A spread in the Forex market represents the difference between two prices, namely the bid and ask price levels. This is an important concept for traders to understand as they are the primary cost of trading currencies. Organised by way of a two-way quote, bid prices signify willing buyers and ask prices determine willing sellers. Think of these prices you—the trader—can engage with the market immediately, or on the spot. The ask price is slightly higher than the underlying market price, whereas the bid price is slightly below the underlying market price. Traders sell the bid and buy the ask. As an example, imagine the EUR/USD’s exchange rate is $1.3000/$1.3001. $1.3000 is the bid and $1.3001 is the ask. Traders entering long EUR/USD (a buy entry) can trade at $1.3001. Conversely, a short position (a sell entry) has a trading price of $1.3000. The difference between bid and ask prices is defined as spread, or Bid/Ask spread, generally measured in pips. To work out the bid/ask spread, you simply minus the ask price from the bid price. Aside from fractional pips—often referred to as points—a pip is the smallest movement in a currency pair. So, for our EUR/USD example, the spread difference would be 1 pip… This is simply found by taking $1.3001 from $1.3000. To help solidify the concept, let’s take a look at another example. The GBP/USD currency pair currently has an ask price of $1.38499 and a bid price of $1.38491. Here we’ve included fractional pips and we can see we have a bid/ask spread of 8 points. FX spreads are either fixed or variable. Fixed spreads are usually wider than variable spreads and not dependent on market conditions; variable spreads, on the other hand, fluctuate in accordance with market conditions. Spreads can be high or low, influenced by a number of factors, such as the currency pair, the time of day and the economic climate. Low spreads mean more liquidity is available in the market, i.e., more willing buyers and sellers, whereas a high spread means a larger difference between the bid and ask price levels, and thus less willing buyers and sellers. Most importantly for traders is that a lower spread makes the market cheaper to trade. Aaron Hill was introduced to financial trading, specifically foreign exchange, over a decade ago. Since then, Aaron caught the trading bug and has amassed substantial knowledge, obtaining CMT (Chartered Market Technician) levels 1 & 2. He has since been awarded the CFTe (Certified Financial Technician) and member of the CMT Association! For FP Markets Webinars: https://www.fpmarkets.com/past-webinars/ #FPMarkets #education #knowledge #trading #investment #academy Facebook:   / firstprudentialmarkets   Twitter:   / fp_markets   LinkedIn:   / admin   Telegram: https://t.me/fpmarketsroom