Learn about Forex
Basic FX Terms
Welcome to the first in this short FX Education series, aimed at introducing new investors to the basic concepts of FX trading. In this edition we define basic FX Terminology.
What is the FX market?
The online trading environment for foreign exchange encompasses the largest, most dynamic capital market in the world with more than USD 3 trillion traded daily. The FX market is a continuous, 24/5 marketplace open from Sunday afternoon (4 PM EDT) through the close of the US markets on Friday (5 PM EDT). The FX market is where investors can trade one currency against another currency.
What is a currency cross?
Currencies are always priced in pairs. All trades take place between two different currencies resulting in the concurrent purchase of one currency and sale of another. For example, when you trade EURUSD, the currency cross is Euros versus US dollars. One currency will be bought (long position) while the other currency is sold (short position).
What is the Bid-Ask Spread?
The bid-ask spread is the buying and selling spread between two currencies. The bid price is the price at which the currency is sold. The ask price is the price at which the currency is bought. The difference between the bid price and the ask price is known as the bid-ask spread. The bid-ask spread differs between currency crosses with more common crosses (majors) having tighter spreads.
