89. Forex Trading - Understanding the Bid/Ask Spread

[puzanshrestha]

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[DayTradersWin]

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[ichersue]

i use metatrader 4 as my trading platform which enables to display bid and ask prices for one currency pair on one tick chart. most of the time the bid and ask prices move together but sometimes they diverge e.g. bid up, ask down (but so far i've never seen them converge, if they do converge). why does this happen and how would it affect the price chart?(ex. can a candlestick simultaneously increase and decrease? how do you determine the close/open prices?) many thanks to anyone who answers

[TheDjbang]

Bid and Ask prices will never converge. Candlestick will go in one direction or the other. However, online platforms take a few seconds to show the true direction of the candle. Example:

If it is trending upward and then downward it will first show as up. After a few seconds it will average out which direction had the strongest momentum then it will show the true direction. Read "Currency Trading For Dummies" by Mark Galant and Brian Dolan.

Good Luck!

[ichersue]

thanks for the answer. for the book, i've finished it long before i actually got into trading, when i was still only considering it. as with every "for dummies" or "idiot's guide" book honestly i find the injection of irrelevant humor distracting. i know they had good intentions when they decided to include jokes in their books, maybe for a better reading experience or memory retention, but personally it's too much

[ichersue]

and by bid & ask prices converging i meant bid = ask or ask > bid, so after diverging as they come back closer together technically they're converging. sorry about my logical error

[TheDjbang]

Give an example in $ terms pls.

[ichersue]

example of what?

[ichersue]

hence as david said in the video bid is sell price while ask is buy price. surely no one will be willing to sell at a price lower than or equal to the buying price, therefore bid = ask or ask > bid is indeed practically impossible

[TheDjbang]

The difference between the bid and the ask is called the "Spread". This is the amount that Metatrader charges you per trade. That is why bid and ask prices will never equal each other, it's how they make money from you trading with them. If their "spread" varies during your trade it means that they're fees are changing while you watch, very bad every time the spread increases. That's one reason why David promotes FXCM trading platform, because their Spreads are more stable.

[germanslobo]

Hello David;!! What time open de Market if I want to buy EUR/USD?. What time close?.

The same question with USD/JPY.

Thanks!!

[swingkid]

If the Euro strengthens with respect to the USD, then the pair would go up, so I think we would place an order to go long the pair.

[InformedTrades]

Hey Swingkid, Glad to hear from you and yes that is correct. Best Regards, Dave

[idiot68]

i heard forex is a good way to make money fast(with the leverage and what not) but a greater way to lose money fast.lol. what say you?

[InformedTrades]

It is a fact that most traders lose money so I would agree that its easier to lose money fast trading than it is to make money fast. Best Regards, Dave

[mmikhaiel]

Hi,

Do you think there is a correlation between the US stock market trading and the Forex trading?

[InformedTrades]

Hi mmikhaiel, Thanks for the comment. In short yes I do think there is some correlation between the US stock market the US Dollar and certain other currencies such as the Japanese Yen. For a more in depth explanation of why I have a bunch of free videos on what moves the forex market in my free forex trading course over at InformedTrades. Best Regards, Dave

[330AKJLP]

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[InformedTrades]

Hi 330AKJLP,

Thanks for the comment. Please feel free to post any questions or info that you would like to share over at the ask answer questions section of InformedTrades. Best Regards, Dave