Bid, Ask Prices, and Spread in Forex Trading – Complete Guide

In forex trading with Errante, mastering bid and ask prices is essential for your trading success. These fundamental market concepts define your entry and exit levels and influence your trading costs and profitability. This comprehensive guide by Errante Academy will help you thoroughly understand bid and ask prices, spreads, and how these concepts affect buy and sell positions, pending orders, as well as stop loss and take profit levels. Additionally, you will learn to visualize these important details clearly using popular trading platforms like MT4, MT5, TradingView, and cTrader.

What are Bid and Ask Prices?

• Bid Price: The price at which Errante allows you to sell a currency pair.
• Ask Price: The price at which Errante enables you to buy a currency pair.

The difference between these two prices is known as the spread, which represents your trading cost charged by Errante or any forex broker.

How Spread Impacts Your Trades at Errante

When entering trades:

• Buy Order (Long Position): You enter at the ask price and exit at the bid price. Price movement must surpass the spread to achieve profitability.
• Sell Order (Short Position): You enter at the bid price and exit at the ask price. Price must move downwards beyond the spread to gain profits.

Practical Example: If the EUR/USD bid price is 1.2000 and the ask price is 1.2002, Errante’s spread is 2 pips.

• Long Position: You buy at the ask price (1.2002). To break even, the bid price must rise to at least 1.2002. For profit, it must surpass this level.
• Short Position: You sell at the bid price (1.2000). To break even, the ask price must fall to at least 1.2000. Profitability occurs below this level.

Spreads significantly impact your profitability. Monitoring spreads is crucial, especially during market volatility or low liquidity periods when spreads may widen.

How Errante Spread Affects Pending Orders

Pending orders execution:

• Buy Limit and Buy Stop Orders: Execute when Errante’s ask price reaches your set level.
• Sell Limit and Sell Stop Orders: Execute when Errante’s bid price reaches your set level.

Understanding this prevents confusion and ensures your trades execute according to your strategy.

Stop Loss and Take Profit with Bid and Ask Prices at Errante

• Stop Loss for Buy Positions: Triggered by Errante’s bid price.
• Take Profit for Buy Positions: Triggered by Errante’s bid price.
• Stop Loss for Sell Positions: Triggered by Errante’s ask price.
• Take Profit for Sell Positions: Triggered by Errante’s ask price.

Traders sometimes notice candles touching stop loss or take profit levels without triggering execution. This occurs because charts usually display bid prices only. For sell positions, tracking the ask price is crucial, as it must reach your set levels to execute.

Finding Bid, Ask, and Spread in Trading Platforms

Here’s how to find these essential metrics in Errante’s supported platforms:

• MT4 and MT5:
  • Bid and Ask displayed in the ‘Market Watch’ window.
  • Spread shown under the ‘Market Watch’ (right-click and select ‘Spread’).

• TradingView:
  • Bid and Ask prices visible on the chart after enabling ‘Bid and Ask Labels’ from ‘Chart Settings.’
  • Spread is typically calculated by traders manually (Ask – Bid).

cTrader:

• Bid and Ask prices prominently displayed at the top of each currency pair chart.
• Spread clearly indicated near the currency pair ticker.

Visualizing Ask Line in Errante’s Supported Platforms

Enhance your trading accuracy by visualizing the ask price clearly:

MetaTrader 4 (MT4) and MetaTrader 5 (MT5)

• Right-click your chart, select ‘Properties.’
• Click the ‘Common’ tab.
• Enable ‘Show Ask Line’ and confirm by clicking ‘OK.’

TradingView

• Click ‘Chart Settings’ (gear icon).
• In the ‘Trading’ section, enable ‘Bid and Ask Labels.’
• Clearly view bid and ask prices directly on your charts.

cTrader

• Open ‘Viewing Options’ (gear icon).
• Activate ‘Show Ask Price’ to display the ask line clearly.

Importance of Displaying the Ask Line

Displaying the ask line helps Errante traders:

• Identify precise entry and exit points.
• Accurately calculate potential trading costs.
• Efficiently manage pending orders and prevent unexpected executions.

Conclusion

Mastering bid and ask prices along with spread calculations at Errante significantly enhances your trading effectiveness. Visualizing these crucial details on MT4, MT5, TradingView, and cTrader helps you improve your trade entries, manage risk effectively, and achieve consistent trading profitability. Keep exploring Errante Academy resources to further strengthen your forex trading skills.

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