Bid and Ask Price: How Buying and Selling Works in Forex

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In Forex trading, understanding the bid and ask price is like learning how to read the market’s price tag. Whether you’re buying or selling a currency pair, these two numbers quietly determine your entry, your exit, and even your profit or loss.

But what exactly do these prices mean, and how do they impact your trades?

Let’s dive deep into the mechanics of buying and selling in Forex using bid and ask prices — with real examples to guide you every step of the way.

What Are Bid and Ask Prices?

Think of Forex trading as a giant currency exchange shop that never sleeps. At any moment, there are buyers offering a price to buy, and sellers setting a price to sell. The bid and ask are the visible outcomes of this constant negotiation.

Bid Price – What Buyers Are Willing to Pay

The bid price is the maximum price a buyer is willing to pay for a currency pair. If you’re looking to sell, you’ll do so at the bid price.

Example:
If EUR/USD shows a bid of 1.10252, it means buyers are offering $1.10252 for every euro.

Ask Price – What Sellers Are Willing to Accept

The ask price (sometimes called the “offer”) is the minimum price a seller is willing to accept. When you decide to buy a currency pair, you pay the ask price.

Example:
If the ask is 1.10264, this is what you’ll pay per euro if you’re buying EUR/USD.

These two prices — bid and ask — are always displayed together in quotes like:

EUR/USD: 1.10252 / 1.10264

Bid on the left (sell), ask on the right (buy).

How Buying and Selling Work in Forex

Now that you understand what the bid and ask represent, let’s break down how buying and selling work in the Forex market.

When You Buy (Go Long)

You’re buying the base currency (the first in the pair) and selling the quote currency (the second).

  • You enter at the Ask Price.
  • You’re expecting the currency pair to rise in value so you can sell it later at a higher Bid Price.

Example:
Let’s say you want to buy EUR/USD:

  • Ask = 1.10264
  • You pay $1.10264 for each euro.
  • Later, if the bid goes up to 1.10500, you can sell for a profit.

When You Sell (Go Short)

You’re selling the base currency and buying the quote currency.

  • You enter at the Bid Price.
  • You’re expecting the pair to fall in value, so you can buy it back later at a lower Ask Price.

Example:
You sell EUR/USD at:

  • Bid = 1.10252
  • Later, if the ask drops to 1.10000, you can buy it back cheaper and lock in profit.

Understanding the Bid-Ask Spread

The bid-ask spread is the difference between the bid and ask prices. This is essentially the “cost” of entering and exiting a trade instantly.

Spread = Trading Cost

Example:

  • EUR/USD: 1.10252 / 1.10264
  • Spread = 0.00012 or 1.2 pips

Even before the market moves, you’re down by the spread amount. That’s why tight spreads matter, especially for scalpers or day traders.

Why the Spread Exists

  • It’s how brokers and liquidity providers make money.
  • It reflects market liquidity: tighter spreads mean more liquidity and less volatility.
  • Wider spreads may occur during news events or low-volume trading hours.

Examples of Bid and Ask Prices

Let’s bring it all together with two practical case studies:

Example 1: Buying and Selling USD/CAD

  • Ask price = 1.4000
    You pay 1.40 CAD to buy 1 USD.
  • Later, Bid price = 1.3900
    You sell and receive 1.39 CAD per USD.

👉 You lose 0.01 CAD per dollar, which is the spread (plus any additional price movement).

Example 2: EUR/USD Day Trade

  • Buy EUR/USD at ask = 1.10264
  • Immediately sell at bid = 1.10252

👉 Spread = 1.2 pips (your initial loss).

To break even, price needs to rise at least 1.2 pips from your entry. Only then do you start making profit.

Why Bid and Ask Prices Matter to Traders

Bid and ask prices aren’t just numbers — they tell you a lot about market structure, liquidity, and cost-efficiency. Here’s why they matter:

1. Control Your Trading Costs

  • Spread = hidden cost
  • Smaller spreads = lower cost per trade
  • Choose brokers and times with tight spreads

2. Gauge Market Liquidity

  • Tight spreads = active markets (e.g. London/New York overlap)
  • Wide spreads = low liquidity (e.g. Asian session, news events)

3. Strategize Your Entries and Exits

  • Use the bid price to plan your take-profits (if long)
  • Use the ask price to set your stop-losses (if short)
  • Place limit orders intelligently using bid/ask info

Key Takeaways

  • The bid price is where you sell, and the ask price is where you buy.
  • The spread is the difference — it’s your transaction cost.
  • Bid and ask prices shift constantly, reflecting real-time supply and demand.
  • Understanding these prices is essential for managing costs and making strategic trading decisions.

Want to Learn More?

Check out these trusted resources:

FAQs: Bid and Ask Prices in Forex

Q: Is the bid or ask price higher?
A: The ask price is always higher than the bid price.

Q: Why does the spread matter?
A: Because it’s your hidden trading cost — it affects your breakeven point and profitability.

Q: Can I buy at the bid price?
A: No. You buy at the ask and sell at the bid. That’s how brokers ensure liquidity and make a profit.