2.2 Bid; ask and the spread in trading Video Lecture | Forex: Learn and Master Trading (English) - Business Basics

welcome back to capex forex trading comm
in this video we're going to focus on
the bid the ask and the spread but
firstly what I want to do is just focus
a little bit on the pricing structure
for currency pairs now on the right hand
side here is a price for this currency
pair
now some brokers tend to use five
decimal places some tend to use for the
actual price itself is the same it's
just that some pro brokers decide to
take the last digit out now what I want
to pretend for this example is that the
price which is highlighted in the black
box here is at a standstill so let's
pretend that that price currently is
1.3550 seven so what does this mean
well the chart showing in front of you
is a chart for the euro USD so the first
currency listed ie the euro is the base
currency and the second currency listed
ie the USD is its counterpart so this
price here means that to buy one euro
it will cost 1.3550 seven US dollars or
1.36
if you want to shorten it so in terms of
the actual buying and selling prices
which is generally what most people
refer to those prices as it is really
worth knowing what the technical terms
before those prices are so the selling
price is referred to as the bid and the
buying price is referred to as the ask
now you may read many technical articles
about why one is called a bid why one is
called the ask but realistically this is
all you need to know now the spread is
the difference between those two prices
okay so these prices obviously are
constantly moving but let's pretend the
difference between those three prices is
- okay that means that the spread is two
pips wide okay now the reason for the
spread is basically for brokers to make
money out of you okay so the way that I
do that is this is as follows no matter
which direction you trade in whether
it's up or whether it's down you will
always start in this particularly
example if the spread is too
you will always start to pips in debt so
if you're trading $1 per pip you will
always start to pips in that ok so you
will have to accumulate no matter which
direction you're going into 2 pips in
order to break even ok so I mean brokers
do make money out of you other ways but
we're going to discuss that in a later
videos but in terms of the bid the ask
and the spread which is the difference
difference between those two prices that
is all you need to know but if you do
have any questions or any comments do
let us know in the comments box below
otherwise we shall see you in the next
lesson