Basics

The first thing to note about the currency trading quotes in the forex market is that there are two of them, the so-called bid and the ask price. The second thing to note is that they do not favor you, the dealer, they favour of the brokers, because that is how he makes his money.

The price is to ask what they should pay you to buy this currency pair. With the EUR / USD as an example, let’s say you believe that the pound will strengthen against the US dollar, which means that the card of the two currencies is going to the graphics.

In such a trade, they would purchase the pound now at a lower rate (and by definition, the sale of United States dollars), so that it at a later date to sell his (hopefully) a higher rate. And because the pound is the base currency, and it controls the direction of trade, to purchase means the pound to buy the currency pair. Such trading is the opening of a long position.

The bid is the exact opposite: it is what they should pay you want to sell, or short, the currency pair. To continue the example of the GBP / USD, let’s say that you believe that the US dollar will strengthen against the pound, instead of the other way around. In this trade, you would be buying the dollar now (and the pound sold) in order to sell it later.

But remember, it is the base currency, with the direction of trade. When buying of cross-currency, which, by definition, to sell the base, in other words, you sell the currency pair rather than to buy them. So all the signals are reversed: The graphic is down on the graphics, and the price of the currency pair falling.

But since you sold or shortening the currency pair bought it instead, you want to lower prices, because it is the price of the base currency, ’s going down, while the price of the Cross. In our example, if you shorted GBP / USD, you would earn a profit if the price of the couple declined.

Calculation of the number of cores earn in a short trading is the same as for a long trade. Just ignore what the purchase or sale price, and subtract the smaller number from the higher one. The difference is the amount of your gain.

Note that the asking price is always greater than the supply. They have no other choice but to buy high and sell low trading on the forex market.

The difference between the bid and the ask, is the spread, and this is the amount of money, the broker takes as its commission. (Yes, that’s all, the broker takes, he makes his profit on a large volume of transactions rather than large commissions.)

Obviously, the smaller the spread, the more money to keep you from what you do. Spreads are competitive among brokers, hold their small spread is a means of attracting customers. And spreads among the most popular currency pairs are generally smaller than those for couples who are not as frequently traded, which is one of the best reasons for keeping with the “majors”, as they are called.