What are the Bid and the Ask prices?

When currency pairs are quoted for trade, they will be followed by two numbers under the heading “Bid” (also known as Sell) and “Ask” (also known as Offer or Buy). The following is an example of a typical trading table:

Instrument    Bid           Ask    


EUR/USD     1.3428   1.3431

USD/JPY      123.40   123.43

GBP/USD     1.9926   1.9930

USD/CHF     1.2375   1.2379

EUR/JPY      165.70   165.74

EUR/GBP     0.6737   0.6740

AUD/USD     0.8468   0.8472

USD/CAD     1.0655   1.0660

EUR/CHF     1.6620   1.6624

GBP/JPY      245.89   245.99


When trading, it is a considered standard that all trades are traded in the nominal value of the major currency. For example, if someone were to trade in EUR/USD in the amount of 100,000, that amount would refer to EUR and not USD. For instance, the terminology would be to Sell 100,000 EUR against the USD at the Bid Price or Buy 100,000 EUR against the USD at the Ask price.

The number represents how much of the secondary currency one needs in order to exchange it to one unit of the major currency. All the numbers represent the value of the major currency in terms of the secondary currency. If looking at the EUR/USD, the ask price for example of 1.3431 means that you need $1 and 34.31 cents in order to buy 1 Euro.

How Do I Trade?

In the case of EUR/USD, the bid price is shown as 1.3428 and the ask price is 1.3431. As explained above, in order to trade, one must trade in an amount of the major currency. Let's assume that a trader wishes to trade in an amount of 100,000 Euro against the US Dollar.




Example 1

Sell 100,000 EUR against the USD - As explained above, the numbers represent the value of the major currency in terms of the secondary currency. Therefore, it makes sense that when a trader wishes to sell the major currency they would be doing so at the smaller number (the Bid), and so in this case at a price of 1.3428.

In monetary terms this would mean that the trader sold 100,000 EUR and bought (100,000*1.3428=) 134,280 USD.

The client's balance sheet would look like this:

Balance in Euro's    Balance in US Dollars

-100,000                 +134,280


Since the trader is now short EUR (Sold EUR) and long USD (Bought USD), he will have to trade the exact opposite trade in the future in order to close the trade and profit.




Example 2

Buy 100,000 EUR against the USD - As explained above, the numbers represent the value of the major currency in terms of the secondary currency. Therefore, it makes sense that when a trader wishes to sell the major currency they would be doing so at the smaller number (the Bid), and so in this case at a price of 1.3431.

In monetary terms this would mean that the client bought 100,000 EUR and sold (100,000*1.3431=) 134,310 USD.

The client's balance sheet would look like this:

Balance in Euro's   Balance in US Dollars

+100,000                -134,310



Since the trader is now long EUR (bought EUR) and short USD (sold USD), he will have to trade the exact opposite trade in the future in order to close the trade and profit.