"Bid vs. Ask"

When looking at a rate quote on the Forex market, you will see two rates: The Bid - the lower price at which you sell The Ask - the higher price at which you buy The difference between the two prices is called the 'spread'; it is the associated cost of making a trade, and is how a broker makes money. Since there are often no commissions in the forex market, the spread is usually the largest cost per transaction. Currency rates often fluctuate in small increments. These increments are commonly measured in "pips", and are equal to one ten-thousandth of a point (the fourth decimal place). By using technical analysis to help predict future rate activity, a trader will try to profit from small rate fluctuations with the use of leverage. With a leverage of 100:1, for instance, a trader can purchase a standard lot of $100,000 with just $1,000. Keep in mind, however, that leverage can magnify profits or losses, so a trader should never trade currency that they aren't prepared to lose. Reading Price Quotes Currencies are always quoted in pairs, with each currency represented by a 3-letter currency code. The first currency is called the base currency, and its value is always 1. The second currency is called the counter currency, and its value is represented by the price quoted. Example: If the rate for the EUR/USD has a price quote of 1.4321, that means €1 EUR (the base currency) can be purchased for $1.43 USD (the counter currency).