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Chapter 5, Part I. Where does the money come from in FOREX? Page 6

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 14, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Pipruit: In the table below the quote board I see different windows.

    - “Lots (1 Lot=10K)” means that 1 Lot equals 10 000 units of base currency (not 100 000, as usual);

    - Some windows I do not understand – Limit price, Stop price, Route, Type, GTC, Part and others.

    - But I see easy way to open trade – “Buy USD/DKK” button, and look – “Short USD/DKK” button. That is what we’ve just discussed!​

    Commander in Pips: Excellent! You’ve done well! For now, don’t pay attention to the buttons that you’ve said “don’t understand them” - Limit price, Stop price, Route, Type, GTC, Part and others. We will talk about them in later chapters. And now just tell me, how do you understand the double quoting?

    EXAMPLE OF A BROKER’S QUOTE BOARD

    [​IMG]

    Pipruit: It seems simple. The first price is that I buy at, the second one - which I sell at. It’s obvious…​

    Commander in Pips: You are wrong. It’s vice versa. You have to keep in mind that these quotes belong to broker. So, Bid price is the price at which broker wants to Buy Base Currency for quote currency. The Ask price – is price at which broker wants to Sell the Base Currency. It’s very easy to remember.

    Bid – this is like on auction. The participants call the bids for some goods. The better bid will win. So, Bid price is a quote, that broker gives you for base currency. This is the price that broker wishes to buy at, other words that he agrees to pay for base currency.

    Ask (or Offer price) – Broker asks you to pay this price or offer you to pay. This price is that he agrees to sell at.

    Just remember, that quote board belongs to broker, hence, these quotes are the prices at which BROKER Buy or Sell, not you. What does it mean for you?

    Pipruit: Let’s see. If Bid is a price that broker agrees to pay per unit of base currency – this will be the rate that I will have to Sell at.

    The same as Ask price is a price that broker Asks me to pay for 1 unit of base currency. So this will be the price that I will have to Buy at.​

    Commander in Pips: As you can see, the quoting system is quite simple. Just click the button and you can easily buy or sell any currency.



    P.S. This lesson was written by Sive Morten, who has been working for a large European Bank since April of 2000, and is currently a supervisor of the bank's risk assessment department. Sive's knowledge of forex market and banking industry is vast and quite complete. If you have any specific questions about forex, banking industry, or any other financial instruments, please post them on the next page and Sive should answer soon.


    Note: FPA ranks are earned in the battles against scam, not in the classroom.
     
    #1 Sive Morten, Dec 14, 2013
    Lasted edited by : Feb 7, 2016
    Nachoga and fran alvarez like this.
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