When choosing a currency pair in the market, the values of exchange are indicated in two prices, which are the bid price and the asking price. The bid price is the rate for selling the currency for another while the asking price is for the percentage of buying a (base) currency and selling the (quote) other. For instance, given a quotation: 1.2001 I 1.5323 for the AUDUSD currency pair, it gives the trading condition to the trader to: Sell AUD for 1.2001 USD (Bid price) Buy 1 AUD for 1.5323 USD (Ask price) Bid price and Ask price are both used in trading like opening and closing a position suggests executing two contrasting moves:
- Opening a buy position is equivalent to buying whereas closing a buy position is equivalent to selling
- Opening a sell position is equal to selling, whereas closing a sell position is equivalent to buying.
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