*Currency Pairs

A currency pair represents the value of one currency relative to another.

The first currency is known as the base currency, while the second currency is the quote currency.

For example, in EUR/USD:

• EUR = Base currency
• USD = Quote currency

If EUR/USD is trading at 1.1000, it means that 1 EUR is worth 1.1000 USD.

Currency pairs that do not include USD are commonly known as cross pairs, such as EUR/GBP and GBP/JPY.

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*Bid Price and Ask Price

The bid price is the price at which you can sell an instrument.

The ask price is the price at which you can buy an instrument.

The difference between the bid and ask price is known as the spread.

Buy positions open at the ask price and close at the bid price.
Sell positions open at the bid price and close at the ask price.

Understanding bid and ask prices is important because they directly affect the cost of entering and exiting a trade.

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*Spread

The spread is the difference between an instrument's bid and ask price.

For example:

Bid: 1.1000
Ask: 1.1002

The spread is 0.0002, or 2 pips.

Spreads can vary depending on the instrument, market conditions, liquidity, and volatility. During periods of high volatility or lower liquidity, spreads may widen.

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