Basic Forex Education_6. How To Place A Trade In Forex

Lesson 6: How To Place A Trade In Forex

In Forex, you exchange one currency for another in the hope that the
currency you bought will gain value against the currency you sold. In every single
Forex transaction, there are always 2 currencies involved. This is because you
simultaneously buy one currency and sell another one.
The first listed currency is called the base currency. The second listed currency is
called the quote currency. The exchange rate tells you how much you had to pay in
units of the quote currency to buy units of the base currency.

For example, you would have to pay 1.36 dollars to buy one euro. Or, you
would get 1.36 dollars if you sell 1 euro.

There are 2 prices when you are trading in Forex goods. The first is the bid
price at which the broker agrees to buy the base currency - in exchange for the
quote currency. The price at which your broker plans to sell the base currency for
the quote currency is known as the ask.

The difference between these two prices is called the spread. So if you want
to sell a Euro, you will sell it at the bid price 1.3598 - and if you want to buy a Euro
you will buy at the price 1.3600.