Definition Of FOREX Bid Ask Prices
FOREX Bid Ask Prices
If you don’t understand what FOREX bid ask prices are, let me explain it to you. When you go to a foreign exchange counter to get some Euros before travelling to Europe, you buy them at a certain price, which is called bid price. When you need to exchange some leftover Euros back to US dollars after visiting European Union, you buy US dollars at a different price which is worse than the Bid Price. This price is called ask price. And the difference between the bid and the ask prices is called spread.
FOREX bid ask prices work the same way as buy and sell prices, and only one thing differs. In FOREX trading, spread is much lower. Because if you trade FOREX, you trade using large amounts of cash, and as a result the price you get is pretty much wholesale.
On FOREX live charts you usually see bid price only. To determine ask price, you need to add spread to whatever you see on your charts. FOREX Bid Ask prices can change unproportionally, if Spread for a particular currency pair is variable and depends on volatility; in this case you need to enable both bid and ask lines in your trading software to monitor the spread and avoid opening when the spread is way too big.
Be careful when you test your trading system on historical FOREX data manually, because if you don’t take Spread into consideration, you may end up with very inaccurate test results.
2 types of FOREX charts exist. The first type is historical charts, and the second type is live charts. Historical charts also have their purpose. They are utilized for strategy back-testing.
There is also so called FOREX live chart simulation many good strategy back-testing software products support that allows a trader to represent historical charts as FOREX live charts, and simulate live trading .
It’s best using any specialized strategy testing software that is designed to calculate profit and loss on an auto-pilot taking Spread into account.
You can get a FOREX strategy back-testing software that does live trading simulation by going to the Download page on my website.Real time live trading simulation is great for testing of FOREX trading strategies, and in case you want to download a superb strategy tester, you may visit my website.
