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Bid/Ask

Forex has a buy (bid) price and a sell (offer) price. If you've been in a foreign country and exchanged money at a kiosk, you've probably noticed a board displaying each currency with two prices. Only a small amount separates them in value. The higher price is the offer price—the amount someone or an institution is asking to sell a currency. The other, lower price is the bid price—the amount someone or an institution is offering to buy a currency. This is no different on a retail Forex screen. The market maker shows a buy/sell or two-sided price, which is the price it is willing to deal on. The difference between the two prices is called the spread, which is expressed in pips. The spread is a function of market conditions and liquidity. Spread rates have tightened significantly over the last few years thanks to increased competition, information flows, and technology. Most Forex firms now offer three-pip spreads on the majors and five on everything else.


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