Understanding bid and ask quotes
Lesson 1 of 4 · about 6 minutes
2 questions, each checked the moment you answer it.
7 steps · about 6 minutes
The interactive lesson walks these ideas one screen at a time and checks your answers as you go. The text below covers the same ground for reading.
A currency pair is two currencies in one price
The first, the euro, is the base currency. The second, the US dollar, is the quote currency. The number is what one unit of the base costs in the quote currency, so EUR/USD at 1.08651 means one euro costs 1.08651 US dollars.
One market is quoted from two sides at once
There is the price someone will buy your euros at, and the higher price someone will sell you euros at. That is why the panel shows EUR/USD as Sell 1.08642 and Buy 1.08651. Nothing has moved between them; you are seeing the same market from the two sides of the trade.
The ask is the price a seller is asking
The ask is the price a seller is asking for the base currency, which makes it the price you are quoted when you buy.
The bid is the price a buyer is bidding
The bid is the price a buyer is bidding for the base currency, and it is the lower of the two: 1.08642, labelled Sell because it is the price you sell at. Press Sell and your order goes to the market to meet a buyer, so a market sell generally fills at or near the bid.
The gap between the two prices is the spread
Open a buy and close it straight away, with nothing moved in between, and the two prices decide what happens: