What bid and ask actually mean

Two prices, not one

If you open a forex platform right now and look at any currency pair, you'll see two numbers. EUR/USD might show 1.0850 / 1.0852. USD/PHP might show 56.45 / 56.48.

The first number is the bid. The second is the ask.

Here's what they mean:

• Bid = the price at which the broker will buy the base currency from you. In other words, this is the price you get when you sell.
• Ask = the price at which the broker will sell the base currency to you. This is the price you pay when you buy.

You always buy at the higher price (ask) and sell at the lower price (bid).

The spread is the broker's cut

The difference between bid and ask is called the spread. It's measured in pips (we'll cover pips soon). For major pairs like EUR/USD, spreads are usually tight — maybe 1 to 3 pips. For exotic pairs or during low liquidity, spreads widen.

The spread is how most brokers make money. You don't pay a separate commission on every trade (though some brokers charge that too). Instead, you pay the spread — built into the price, invisible unless you're looking for it.

You start every trade at a loss

This is the part beginners miss.

Let's say you buy EUR/USD at 1.0852 (the ask price). The moment your trade is live, if you tried to close it, you'd sell at 1.0850 (the bid price). You're already down 2 pips.

The price has to move past your entry just to get you back to zero.

A local example

Imagine you're at a money changer in Manila. They buy your dollars at ₱56.00 and sell dollars at ₱56.50. That ₱0.50 gap is their spread. If you buy $100 USD and immediately change your mind and sell it back, you lose ₱50 on the round trip.

Forex works the same way — just faster, and the spread is smaller.

Why this matters for your strategy

If you're planning to scalp (take many small trades), the spread eats into every winner. A 2-pip spread on a 5-pip profit target means you're giving up 40% before you even start.

If you're swing trading and holding for days, a 2-pip spread is noise.

Know the cost. Count it. It's not optional.

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