I think we all have seen countless posts by new traders who did not take the time to properly learn how to trade, not even the very basics. They fall for bad advertising from shady brokers and think trading is as easy as choosing a currency pair, picking the direction and entering the lot size.
Then they come to forums and are confused as of why their trades where not executed while the price they entered was reached on their charts. One of the reasons is often that they do not know if they need to look at the bid price or at the ask price.
I think there have been plenty of good pieces written about it, and I just wanted to offer a very simple take on it:
When you enter a trade on the bid price, you will have to look at the ask price in order to exit your trade and when you enter a trade on the ask price you will have to look at the bid price to exit your trade.
Depending on your broker and currency pair, the spread (the difference between bid and ask price) should not be too high, on major currency crosses even below 1.0 pip. I hope this helps some newbies to remember it.
Then they come to forums and are confused as of why their trades where not executed while the price they entered was reached on their charts. One of the reasons is often that they do not know if they need to look at the bid price or at the ask price.
I think there have been plenty of good pieces written about it, and I just wanted to offer a very simple take on it:
When you enter a trade on the bid price, you will have to look at the ask price in order to exit your trade and when you enter a trade on the ask price you will have to look at the bid price to exit your trade.
Depending on your broker and currency pair, the spread (the difference between bid and ask price) should not be too high, on major currency crosses even below 1.0 pip. I hope this helps some newbies to remember it.
