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Bids, asks, and spreads

In trading, a bid is the highest price a buyer is willing to pay for an asset. An ask is the lowest price a seller is willing to accept. The spread is the difference between the bid and ask prices. A narrower spread indicates higher liquidity and lower transaction costs, while a wider spread suggests lower liquidity and higher costs. The spread directly affects trading profitability, as traders must overcome this difference to achieve gains.

In the world of forex we call the low price the BID price. That’s what the broker will bid for your forex pair. The higher rate is called the ASK. That’s what he’s asking for his pairs – selling them to YOU. With MT5, we can click to see one, both or none of these lines.

Now, when you open a long position, you’re buying the forex pair at the ASK price. When you close that position, you’ll be selling the pair back to the broker at his BID price. What that means is that to be profitable, the value of the BID must first cover the distance of the ASK you paid. Open and close immediately and you’ve lost the spread.

Alternatively, when you open a short position, you’re first selling the broker the pair at the lower BID price and buying it at the ASK when you close the position. A short means the price is falling, but the ASK must first fall below the opening BID price, which was lower.

So when you’re trading, especially if you’re scalping, always keep an eye on both the ASK and the BID. It could be the difference between a loss and a win.