Forex Quotation Tutorial: Instantly Understand the Difference and Application of Ask Price and Bid Price

2025-05-07
Terms, Learn Forex, Newbie

A Must-Read Forex Quote Guide for Beginners! Understand the Difference Between the Buy Price (Ask) and Sell Price (Bid), Spread, and Order Placement Applications to Ensure You Trade Correctly Without Loss.

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This website uses AI-assisted translation. If you have any feedback or suggestions, feel free to contact us. We look forward to receiving your valuable feedback! [email protected]

Understanding Forex Quotes: The Difference and Application of Bid and Ask Prices

When you open a forex trading platform and prepare to start trading, the first thing you see is the constantly changing prices.
You will notice that for each currency pair, usually two prices are displayed instead of just one.
These two prices are the "Ask Price" and the "Bid Price".

Understanding what these two prices represent and which price to look at when you want to buy or sell is the most basic prerequisite for forex trading.
If you get it wrong, it may lead to order costs that are not as expected.
Don’t worry, this article will explain clearly and simply the difference and usage of these two prices.

1. Forex Quotes: A Pair of Prices

We know that forex trading involves buying and selling "currency pairs".
A currency pair quote shows the value of the "base currency" (the currency on the left side of the slash) measured in the "quote currency" (the currency on the right side of the slash).
The market always provides two slightly different numbers for this value, forming a pair of quotes.

2. "Ask Price": The Price You Pay When Buying

The "Ask Price" is sometimes also called the "Offer Price".
The key points you need to remember are:

This is the price at which the market (or your broker) is willing to "sell" the base currency to you.
In other words, when you want to "buy" (Buy / Long) the currency pair, the price you pay is this "Ask Price".
It is usually the higher price in the quote. Think of it this way: when you want to buy something from someone, the seller’s asking price (Ask Price) is usually higher.

3. "Bid Price": The Price You Receive When Selling

The "Bid Price" is sometimes also called the "Buyer’s Price".
The key points you need to remember are:

This is the price at which the market (or your broker) is willing to "buy" the base currency from you.
In other words, when you want to "sell" (Sell / Short) the currency pair, the price you receive is this "Bid Price".
It is usually the lower price in the quote. Think of it this way: when you want to sell something to someone, the buyer’s bid price (Bid Price) is usually lower.

4. The Difference Between the Two: Understanding the "Spread"

Now you understand that at any time, the market has a bid price and an ask price, and the ask price is always higher than the bid price.
So, what is the difference between these two prices?

This difference is what we have discussed in detail in previous articles as the "spread".
Spread = Ask Price - Bid Price

The spread is one of the main costs of trading, representing the fee you pay to complete a trade.

5. Practical Application: Which Price to Look at When Placing Orders?

Understanding the bid and ask prices is crucial for your actual order placement:

When you expect a currency pair to rise and decide to click the "Buy" button on the platform or set a buy order, your trade will be executed at the current "Ask Price".
When you expect a currency pair to fall and decide to click the "Sell" button on the platform or set a sell order, your trade will be executed at the current "Bid Price".

Please remember:

Buying is executed at the higher Ask price.
Selling is executed at the lower Bid price.

This also explains why your trade initially shows a slight loss—because the market price needs to move beyond the spread distance before you break even.

6. A Clear Example

Suppose you see the GBP/USD quote on the trading platform as follows:
GBP/USD 1.2690 / 1.2691

Here:

The number on the left side of the slash, 1.2690, is the Bid Price.
The number on the right side of the slash, 1.2691, is the Ask Price.

The spread between them is 1.2691 - 1.2690 = 0.0001, which is 1 pip.

Now:

If you think GBP will rise and decide to buy GBP/USD, your execution price will be 1.2691.
If you think GBP will fall and decide to sell GBP/USD, your execution price will be 1.2690.

Conclusion

Understanding the bid and ask prices in forex quotes is fundamental to trading.
In summary:

Bid (Sell Price): The price you receive when selling (lower price).
Ask (Buy Price): The price you pay when buying (higher price).

The difference between them is the spread.

Next time you prepare to place an order, make sure you are looking at the correct price.
Buy at Ask, Sell at Bid.
This seemingly simple detail is the first step to ensuring your trade execution meets your expectations.
It is recommended to observe the movement of these two prices and the changes in the spread on a demo platform.

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