Bid Price in Forex — Meaning, Example, and How It Works
Bid Price in Forex — Meaning, Example, and How It Works
Clear explanation • Practical example • Common mistakes • Quick FAQ
Definition
The bid price is the price at which the market or your broker is willing to buy a currency pair from you. If you want to sell the pair immediately, you will receive the bid price.
How Bid Relates to Ask and Spread
- Bid = price the market will buy from you (you sell at the bid).
- Ask = price the market will sell to you (you buy at the ask).
- Spread = Ask − Bid. This is the broker’s visible cost for instant execution.
Example
Current EUR/USD quote: 1.1050 / 1.1052
- Bid = 1.1050 → if you sell EUR/USD, you get 1.1050.
- Ask = 1.1052 → if you buy EUR/USD, you pay 1.1052.
- Spread = 0.0002 = 2 pips.
Why Bid Matters for Traders
– Determines the price you receive when selling.
– Affects profit calculation when closing buy trades.
– In volatile markets, the bid can move rapidly, affecting trade exits.
Practical Tips
- Monitor the bid when planning sell entries or buy exits.
- During news events, the bid can move sharply and spreads can widen.
- Use stop-limit orders if you want more control over the bid price you receive.
Common Mistakes
- Confusing bid with ask.
- Not accounting for spread when calculating profit on buys.
- Assuming the bid is the same across all brokers.
Quick FAQ
Q: Do sell orders always execute at the bid price?
A: Yes for market sells. Limit orders can get a better price if the market moves in your favor.
Q: Why is the bid usually lower than the ask?
A: The difference is the spread, which is part of the transaction cost.
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