Traders in the foreign exchange market buy and sell currency to try to make profit. There are two prices for currency: the buy price, called the 'BID'; and the sell price, called the 'ASK'.
The difference between the 'bid' and the 'ask' is called the 'spread'. The spread represents the difference between what the market maker gives to buy from a trader, and what the market maker takes to sell to a trader.
For example: the EUR / USD bid / ask rate is 1.2100/1.2200. The market maker gives $ 1.21 when buying from the trader, but takes $ 1.22 when selling to the trader. If traders buy and sell immediately without any change in the exchange rate, they lose money. This happens because of the spread - traders pay more to buy the currency than they receive when they sell in that one moment.
In fact, the spread is the leading source of income for the market maker. Like any other market, the merchant will buy at one price and sell at a higher price.
Quotes
The price of a currency is called the 'quote'. There are two forms of quotes in the Forex market: direct quotes, and indirect quotes.
A direct quote is the price for one US dollar in terms of another currency.
An indirect quote is the price for one UNIT of another currency in terms of the US dollar.
Please note: in general, most currencies are quoted against the USD (eg - "direct quote").
But, the EUR, GBP, AUD, NZD (as well as Gold XAU and silver XAG) are indirect quoted, for example: GBP / USD.
The quote is the price to a currency pair that the deal will be made with. This is unlike an 'indication', where the price given by a market maker is only informational (for trader's knowledge, rather than for execution). Real time quotes are provided to Easy-Forex ® logged in users. Delayed quotes ('indication') are provided to the rest of the site users.
The difference between the 'bid' and the 'ask' is called the 'spread'. The spread represents the difference between what the market maker gives to buy from a trader, and what the market maker takes to sell to a trader.
For example: the EUR / USD bid / ask rate is 1.2100/1.2200. The market maker gives $ 1.21 when buying from the trader, but takes $ 1.22 when selling to the trader. If traders buy and sell immediately without any change in the exchange rate, they lose money. This happens because of the spread - traders pay more to buy the currency than they receive when they sell in that one moment.
In fact, the spread is the leading source of income for the market maker. Like any other market, the merchant will buy at one price and sell at a higher price.
Quotes
The price of a currency is called the 'quote'. There are two forms of quotes in the Forex market: direct quotes, and indirect quotes.
A direct quote is the price for one US dollar in terms of another currency.
An indirect quote is the price for one UNIT of another currency in terms of the US dollar.
Please note: in general, most currencies are quoted against the USD (eg - "direct quote").
But, the EUR, GBP, AUD, NZD (as well as Gold XAU and silver XAG) are indirect quoted, for example: GBP / USD.
The quote is the price to a currency pair that the deal will be made with. This is unlike an 'indication', where the price given by a market maker is only informational (for trader's knowledge, rather than for execution). Real time quotes are provided to Easy-Forex ® logged in users. Delayed quotes ('indication') are provided to the rest of the site users.
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