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When going short on forex should i look bid price or ask?

When going short on forex, traders may often find themselves wondering whether to look at the bid price or the ask price. Understanding the difference between these two prices and when to use them is crucial for successful forex trading.

Bid Price vs. Ask Price: What’s the Difference?

The bid price is the price at which a trader can sell a currency pair, while the ask price is the price at which a trader can buy a currency pair. The bid price is always lower than the ask price, and the difference between the two is known as the spread.

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In other words, the bid price represents the highest price a buyer is willing to pay for a currency pair, while the ask price represents the lowest price a seller is willing to accept for the same currency pair.

Which Price Should You Look At When Going Short on Forex?

When going short on forex, traders should always look at the bid price. This is because when going short, traders are essentially selling a currency pair, and the bid price is the price at which they can sell it.

For example, let’s say a trader wants to go short on the EUR/USD currency pair. The current bid/ask price for the pair is 1.2000/1.2005. If the trader wants to sell one lot of EUR/USD, they would sell it at the bid price of 1.2000.

It’s important to note that when going short, the trader is looking to make a profit from the price of the currency pair decreasing. If the price of the currency pair does decrease, the trader can then buy it back at a lower price and make a profit.

On the other hand, if the trader were to look at the ask price when going short, they would be looking at the price at which they could potentially buy the currency pair. This would be incorrect as they are not looking to buy the currency pair, but rather sell it.

Why is it Important to Use the Bid Price When Going Short?

Using the bid price when going short is important as it ensures that the trader is selling the currency pair at the best possible price. The bid price is the price at which buyers are willing to buy the currency pair, and therefore represents the highest price the trader can sell it for.

Furthermore, using the bid price when going short ensures that the trader is not overpaying for the currency pair, which would result in a smaller profit or potentially a loss.

Conclusion

In conclusion, when going short on forex, traders should always look at the bid price. This is because the bid price is the price at which the trader can sell the currency pair, and therefore represents the best possible price. Using the bid price also ensures that the trader is not overpaying for the currency pair, which could result in a smaller profit or a loss. By understanding the difference between the bid price and ask price, traders can make more informed decisions and increase their chances of success in the forex market.

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