Tuesday, July 5, 2011

Bid, Offer, Spreads and How to Read Forex Quotes

After learning how to deal in forex trading, it now needs to know its main activity, buying and selling. Forex trading activity is not separated from the 'Buy' and 'Sell'. Every trader has the freedom to perform one action on which he was to gain profit. Buy can also matched with a 'Bid' or 'Long'. And 'sell' paired with the 'Offer' or 'Short'. So if you read an article about forex and there is mentioned a term 'Bid' or 'Long', need not be confused because the two terms are synonymous with Buy.

Reading the quotes is easy. But if we do not understand can be confusing. Quotes on forex transactions is usually written in conjunction with its pairs and always follow the market changes from time to time (running / real time).

If you are a newbie in the market, then you will see many foreign terms that sounded weird. To that end, my-trade.blogspot.com has posted about forex trading terms that you can access through this blog.

How to read quotes quite simple if we remember two things:

1. The first currency mentioned is the base currency
2. Base currency value is always 1.

For example: USD / CHF 1.4623 means 1 U.S. dollar is worth 1.4623 Swiss Francs. If on the next time a value of USD / CHF 1.4630 means the U.S. dollar rose 7 points because they can buy more Swiss Franc. There are terms in the forex called Bullish and Bearish. Bullish means a currency trend which is being strengthened against other currencies. Bearish is a trend of weakening a currency exchange rate compared to other

Each pairs have two price displayed: the purchase price (bid) and selling price (offer). The difference between them is called 'spread'. So, if we use the example above, USD / CHF 1.4623/28 means the selling price of U.S. Dollar is 1.4623 Swiss Franc and the purchase price is 1.4628. Here the Spread value is 5 (.. 28 -.. 25 = 5).

Spread is determined by the brokers and its value varies between one broker with another. The less spread is better for investors. There are forex trading brokers with a competitive spreads, such as MB Trading (spread according to market) and Capital Gain (fixed spread).

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