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Bid and Ask Price Meaning in Forex

Bid and ask meaning in forex

There are different types of securities that can be traded in a financial marketplace. In the case of the forex market, the currencies of different countries and the forex rates are the securities that are traded in the market. In financial markets, especially the forex market, most buyers and sellers like businesses and investors will not interact with each other directly. Instead, the trades in securities like forex will be routed through intermediaries like traders and dealers who will purchase and sell the security on behalf of their client.

Since the traders and dealers are taking a risk in purchasing and selling the forex, there is likely to be a difference in the value of prices at which the security will be purchased and sold. Typically a forex trader will offer a lower price for a currency if he is purchasing it and sell it at a higher price to the currency buyers to compensate for the risk he is taking when investing his money in the currency at a particular time. Hence those who are dealing in forex should be aware of the bid and ask meaning in forex since these terms are used frequently by those selling and buying forex.

Bid price

The bid price in forex is the maximum exchange rate which a forex trader is willing to pay for the currency pair. The forex buyer will always be interested in paying the lowest price for the currency he wishes to purchase and will specify the lowest bid price. This bid price will be considered by forex traders, who wish to sell the specified currency. However, the currency will only be purchased when the currency buyer is able to find a seller who is willing to match his bid price. If the buyer is unable to find a seller, matching his bid price, he may have to increase it.

Ask price

Ask price is the lowest price that the forex dealer or trader is willing to sell the currency for. Often the forex dealer is acting on behalf of a business that is selling a particular currency which it has received as payment for a product or service sold. The dealer will usually look at the bid price of the currency to set the asking price. A deal will be finalized when the forex dealer finds a trader willing to pay the asking price. Though the dealer would want to maximize his profit, setting the asking price high as possible, he will find it difficult to find a buyer for currency, if the price is much higher than the market rate.

Here are below bid, ask price , spread example:

Understanding the bid, ask price

The bid and the ask price are important for those who wish to deal in forex since they provide an indication of the rates at which a transaction is likely to get finalized. The forex trader who wishes to purchase currency will find that he is paying a price which is higher than the current selling price of the currency since there are transaction costs involved for every trade. The information about the bid and ask prices provided by the various forex traders and dealers are used by the forex buyer or seller to choose the trader or dealer who is offering the best possible price.

The asking price, the bid price is an indication of the transaction cost which a person will incur if they purchase a currency and sell it immediately. The bid and ask price will also depend on the economy of the country, financial stability. In some countries, the inflation rates are high, and the currency value, is decreasing rapidly. In these cases, forex traders will find it difficult to find buyers for the currency of the country. Hence if they are investing in this currency, they will usually keep the asking price higher.

Spread

The difference between the bid and the asking price for a particular currency pair is called the forex spread or bid-ask spread. It is an indication of the market liquidity, how easy or difficult it is for a seller to find a buyer who is willing to pay the price he requires. When there is a lot of liquidity in the market, the spread will be low, and when there is less liquidity in the market, the spread will be higher. Typically when forex markets are open, the spread for major currency pairs like the USD/Euro will below. On weekends, major forex dealers are closed, reducing the liquidity in the market and the spread will also be higher.

How to Calculate Forex Gain or Loss

by Fxigor

How to Calculate Forex Gain or Loss

Compared to other financial markets the currency markets are different. Whereas for the stock investment we can say that it is just a bet that you place in a company, and a position of foreign exchange is bet on the whole currency value that is relative to other currencies.

For instance, if you’re thinking that the euro will have increased value, you; won’t simply purchase euros. You will need to look out for other currencies against which you consider that euros appreciate well. Thus, you can purchase EUR/USD, which can effectively be said as a bet that the euro appreciates well in values against the U.S. dollar.

What is Gain/Loss in Foreign Exchange?

Before moving on straight to how to calculate forex gain or loss we must firmly understand Gain/Loss in Forex. When someone sells any form of services and goods in foreign currency there is a possibility of gain or loss in foreign exchange. The total value of the foreign currency, while it gets converted to local seller currency varies depending on the exchange rate that prevails. When the currency value inclines after converting, the seller gets gain in foreign currency.

However, when the currency value declines the post-conversion process, the seller incurs a loss in foreign exchange. When it becomes impossible to find out present exchange rates while the transaction gets recognized, further the available rate of exchange is used for calculating the conversion outcome.

Forex Gains/Losses – Realized and unrealized

Gains and losses in realized and unrealized form through forex transactions vary on whether or not the entire transaction gets finished till the end of the total accounting period.

Gains/Losses – Realized and unrealized

Realized gains and losses are losses and gains that are completed. This would mean that the customer already gets settled for the invoice before the closure of the accounting period.

To take an example, let’s assume that the customer buys items that are worth $1000 through the U.S. seller and the invoice gets valuation at $1,100 on the date of the invoice. The customer than settles the invoice at 15 days post the date of sending the invoice, and the total valuation of the invoice was $1200 while it was converted to USD at the present rate of exchange.

Here in this case, the seller would have realized gains from foreign exchange of $100 ($1,200 – $1,100). Currency gain gets recorded in the income section’s income statement.

Unrealized Gains/Losses

Gains and losses that are unrealized that the seller expects to earn while the invoice gets settlement but the customer fails to pay the invoice after the closure of the accounting period. The gains and losses get calculated b seller that would get sustained when the customer pays invoice by the accounting period’s end.

Let’s suppose when the seller sends invoices worth 1,000 EUR, the valuation of the total invoice will remain at 1,100 USD as in the date of the invoice. Now, if the customer doesn’t pay invoices as of the accounting period’s last day, and the invoice gets valued at $1,000 at that time.

Upon preparing financial statements for accounting period, the whole transaction gets recorded as a $100 unrealized loss at actual payment was to be actually received. The losses or gains that were unrealized get recorded in the balance sheet in the owner’s equity section.

Foreign Exchange Gains/Losses Examples

ABC Company is a business operating from the U.S. that specializes in the manufacture of parts for motor vehicle giants Maybach and Bugatti. The company has sold its parts to distributors across France and United Kingdom. In the previous financial year, the ABC company sold spare parts of worth 100,000 EUR to France distributors and parts of worth GBP 100,000 to distributors in the United Kingdom.

While sending invoices, the value of 1 GBP was at 1.3 USD, while and 1.1 USD was for 1 EUR. Upon receiving invoice payments, one GBP got equal to 1.2 USD, while at that time one Euro value was at 1.15 U.S. Dollars.

Therefore, to know how to calculate forex gain or loss in conversions we need to apply the following:

Sales in France

= (1.15 x 100,000) – (1.1×100, 000)

= 115,000 – 110,000

= $5,000 (Foreign currency gain)

Total sales in UK

(1.2 x 100, 000) – (1.3 x 100, 000)

=120,000 – 130, 000

= -$10,000 (Foreign Currency loss)

Recording Forex Gains/Losses

While preparation of yearly financial statements, companies need to report their transactions in the home currency for making it simple for all stakeholders to know all financial reports. This would mean that all foreign currency transactions need to be converted in home currencies at current exchange rates when businesses recognize transactions.

Although, the little math applied here for how to calculate forex gain or loss would first appear daunting, but calculating losses and gains in foreign exchange is just like converting one currency to another time to time.

How Currency Futures Work ?

by Fxigor

Forex futures contracts

The foreign exchange (forex) rates for currencies are always changing depending on a number of factors, so a business trader may wish to ensure that currency is available at a specified rate in the future. Currency futures contracts are a type of forex futures contract for exchanging a particular currency to another at an exchange rate which is fixed on a specified future date. These future contracts are also called forex futures contracts or abbreviated as FX futures. Since the contract value for the future depends on the exchange rate for the currencies, futures contracts are considered to be financial derivatives.

Currency forwards are similar to forex futures in many ways. However, unlike the forwards which are customized, the contracts for futures are standardized. These futures contracts are also traded on centralized exchanges. These currency futures may be used for speculative purposes or for hedging. Since speculators holding the futures can leverage their position, and the futures contracts are extremely liquid, the speculators will prefer to use currency futures instead of currency forwards. Typically one of the currencies in the futures contract is the US dollar.

Understanding currency futures

The forex futures or currency futures are standardized contracts for specified amounts, which can be purchased or sold at the exchanges. These futures are either physically delivered or cash-settled. For the physical delivery of the future, at the date of expiry, the currencies of the amount indicated in the contract must be exchanged. The cash settlement of the futures is done daily based on market prices. Since the prices of the currencies change daily, the difference is settled paying cash till the date of expiration of the contract. The contract can be closed at any date. Forex-futures contracts have multiple components.

Foreign currency futures contract componenets

Underlying asset – this is the exchange rate which has been specified for the currencies

Expiration date – for futures that are physically delivered, it is the date when the currencies are to be exchanged. In the case of cash-settled futures, it is the last date when it will be settled.

Size – the size of a futures contract is standardized. For example, the currency contract for euros is typically standardized at 125,000 euros

Margin requirement – A margin is initially required to enter a futures contract and is called the initial margin. A maintenance margin is also usually specified. If the initial margin reduces below the maintenance margin, a margin call will take place. The trader or investor should deposit money to ensure that the margin is above the maintenance margin specified. Margins can be implemented since currency futures can be traded through clearinghouses and centralized exchanges. These margins reduce the counterparty risk when compared to currency forwards. Typically the initial margin and maintenance margin are four and two percent respectively.

How are currency futures used

Forex futures may be used for speculation or hedging like other futures. The FX futures may be purchased by a business that knows that it will require foreign currency in the future, yet does not wish to purchase the foreign currency immediately. This purchase will help the business in hedging against the volatility if any, in the currency exchange rate. On the expiration date, when the business has to purchase the currency, it will be guaranteed the exchange rate specified in the contract for the FX futures. Similarly, if the business knows that they will receive a large amount in foreign currency for payment, they may use futures for hedging.

Example – How can currency futures be used to hedge the risk ?

For example, the trader sells futures contracts on the euro (EURUSD projection down) to hedge its projected receipt because If the euro depreciates against the US dollar, the company’s projected receipt is protected.

Speculators also use currency futures to make a profit. If the speculators expect the exchange rate for a particular currency to increase, he may purchase a contract for FX futures, hoping for a profit. The speculators can afford these contracts, since the initial margin, is usually very small compared to the contract size. The speculators can leverage their position, to increase their exposure to changes in the exchange rate.

The currency futures can also be used while comparing interest rates in different countries. If there is no parity in the interest rates, the trader may implement arbitrage, using borrowed funds, and a futures contract to make a profit. Investors who are interested in hedging will prefer to use currency forwards since these can be easily customized when compare to the standardized futures contracts. In contrast, currency futures are preferred by speculators since they allow leverage and have high liquidity.

What Does Spread Mean in Forex?

by Fxigor

Calculating the forex spread for a currency deal

The foreign exchange (abbreviated as forex) market is the largest financial market and there are a large number of companies, traders and dealers who are buying and selling different currencies. Usually, the buyer and seller of forex will not deal directly with each other, they will use the services of a trader or dealer to purchase or sell the currencies they require. The trader who is purchasing the currency will specify the maximum amount he will pay which is the bid price. Similarly, the dealer who is selling the currency will also indicate the lowest price for which the currency will be sold.

Forex Spread definition

The forex spread also called the bid-ask spread is the difference between the bid and the ask prices for a specified currency pair. The forex traders and dealers are aware that different companies and organizations worldwide are valuing the currencies of each country differently based on demand and supply. Hence using the information which they have, they are selling and purchasing currencies. The forex trades exploit the fact that the information in the market is asymmetrical, all traders and dealers do not have access to the same information, and this will affect the trading decisions they take

Forex spread Formula

The Forex spread is usually calculated as a percentage and the formula for the forex spread cost calculator is given below

Spread % = ((Ask price – Bid price)/Ask price) X 100

where for the specific deal

Ask price is the lowest price for which currency units will be sold by the dealer

The bid price is the highest price for which the trader will purchase currency units for the deal.

Spread in currency trading

Theoretically, the price at which a trade should take place is the midpoint of the forex spread. This midpoint is calculated by adding the bid and ask price for the deal and getting the average, by dividing the sum obtained by two. Since the currency prices are changing rapidly, the trader and dealer are taking some risk selling and buying currencies, and the spread compensates the traders, dealers for the risk they take.

Factors affecting forex spread for deals

The forex spreads are affected by a large number of factors, which vary depending on the currency pair being considered. Some of these factors are discussed below.

Trading volumes

Usually, when trading volumes are higher, it indicates that there is more liquidity in the market. This also usually implies that the bid-ask spread will be lower. When the forex spread decreases, the difference in the valuations of the dealer, the buyer of the specific currency will also decrease. Hence forex dealers will find it easier to find a buyer whose bid price is similar to their ask price and finalize the trade. Similarly for liquid markets, currency buyers find it easier to find dealers, accepting their offer to purchase the currency at the specified price. Usually, forex spreads will be higher when trading volumes are lower, since dealers, buyers will find it more difficult to find a trade partner for the currency at the price they specify

Political and economic risks

In countries where the economy and the political climate is not stable, the currency is usually associated with greater risk, since its value can fluctuate frequently. In these countries, the inflation rate is typically higher and the approach towards the monetary policy is not very disciplined. Hence for the currencies of these countries, the forex spread will be higher. Due to economic conditions, the dealers will consider the currency of these countries as a risky investment and will sell the currency at a higher price to compensate for the risk. Similarly, the buyers will also want to purchase the currency at a discounted price, to compensate them for the risk which they are taking. So the bid-ask spread will increase in these economies, reducing the forex trade volumes.

Volatile currency

The exchange rate for the currency of a country depends to a large extent on having a central bank which is stable, and discipline in the monetary policy. If the central bank is not stable, and undisciplined, the exchange rate for the currency will change more often. Hence to compensate for the risk which they are taking, the dealers will increase the ask price for the currency, and this will also make the forex spread for the currency higher.

George Soros Biography

by Fxigor

Introduction – George Soros Bio
George Soros quotes:

George Soros was born in the year 1930, August 12 in Budapest, Hungary.Who is George Soros? Soros is an American-Hungarian author, political activist, philanthropist, business magnate and investor. He is among the most successful investors in the world. He had a network of $7.6 billion as of 2017 February after donating $17 billion to the Open Society Foundations, his philanthropic agency. George Soros Net worth was $25.2 billion as of Mar 22, 2017. In 2018., George Soros net worth is 8 billion USD.
George Soros became popular in the year 1992, during the time that he made $10 billion from one bet that was against the British pound. The speculation of the currency gave the investor profits that added up to $1 billion in the first day and more than $2 billion afterward. He even was given the “the man that broke the Back of England” nickname.

Main facts:
Father:Tivadar Schwartz
Mother: Erzebet Szucz
Brother: Paul
Ex-spouse: Annaliese Witschak and Susan Weber
George Soros children are: Alexander, Andrea, Gregory, Jonathan, Robert
George Soros is married to Tamiko Bolton, who’s 42 years younger than him from 2018.
Where is George Soros ? – He lives in New York, Katonah, USA

Education and Career
How did George Soros make his money?

He attended the School of Economics in London where he earned a bachelor of science in philosophy and Master of Science in philosophy in the years 1951 and 1954 respectively (“George Soros,” 2018). Soros could not find any jobs after he graduated and therefore he decided to settle for employment as a traveling salesman for wholesaler f of fancy gods that sold to retailers in the resort’s seaside. The individual described this moment as one of the lowest in his life. He wrote interview letters too many banks that ignored him and also humiliated him in the process of the interview (Soros, 2010). He worked as a clear at Singer and Friedlander, a bank in London. He also employed as an arbitrage trader in the years 1956 to 1969 at F.M Mayer. Here he was specializing in European stocks that were popular with the United States investors because of the formation of steel community that later transformed to the common market. Thereafter, he worked in an investment bank in the place. He later left for the US in the year 1956 where he was employed as an investment manager and an analyst for various firms.

Soros’s Philosophy of Investment – How did George Soros get his wealth
George Soros had an ability to synchronize world economic trends with the leveraged and highly detailed strategy in currencies and bonds. He operated as a speculator shortly and was able to make bets on the trends of financial markets. He had a belief that the financial markets tended to depend on the amateur and professional traders and the people that purchase or sell assets on the market. Soros aimed at capitalizing on the emotional or human capacity of the influencers of the market to transform the investment decisions and opinions of others . The man was always looking for a way to stand out or be unique from the crowd as much as he followed investment trends. This was one of the greatest paydays. He trusted his reaction regarding busing and selling and this made his strategy hard to emulate.

How did George Soros make his money ?
He left work in 1073 to look for his personal hedge fund, the Soros Management Fund. The fund turned to the Quantum Fund and eventually Soros was able to develop the company to a highly successful and aggressive hedge fund which made annual returns of 30% annually. There are two occasions when the fund posted profits that exceeded 100%. In the early 1990s, Soros was declared among the richest individuals on earth.

Market and Major Trades
Soros was contacted by Georges Pebereau a financier in France in the year 1988 that wanted him to take part in an effort of assembling a team of investors to buy a big number of shares in a French bank which was part of a program of privatization. Soros, however, decided not to participate in the effort and opted to move forward personally with the strategy of putting shares in four companies in France which included Paribas, Suez, and Societe Generale. In the year 1989, a French regulatory authority of stock exchange performed an investigation to know if the transaction of Soros in Societe Generale was inside trading. Soros got no information from the company and had no information of the business insider but he knew that there was a group of investors who were planning a takeover. The first investigation proved that Soros was innocent and there were no charges against him. The case was later reopened after a few years and he was convicted in the year 2006 by the French Supreme court. Soros, however, declined the charges and said that the takeover news was public knowledge and the document said that the intent of the individual to have the company shares showed that he was aware of the takeover.
George Soros Versus the British Pound – How Did George Soros Get Rich in one day ?

Soros is remembered by the “the man that broke the Back of England” nickname. He is also a known speculator of currency and does not limit his efforts to a specific area geographically but considers the whole world when looking for opportunities. The man borrowed billions of dollars in the year 192 which were worth the British pound then changed them to German Marks. When the pound crashed, George Soros had to repay his lenders on the basis of the lower new pound value. He pocketed an excess of around $1 billion that is the difference between the pound value and the mark value in a one-day trading
George Soros made the same move with the Asian currency during the Asian Financial Crisis of the year 1997. He took part in a frenzy which led to the collapse of the Thailand currency. The trades became so effective since those national currencies that speculators bet against mostly got pegged to other currencies. This means that there were agreements to prop up those currencies to ensure that they were able to trade in a particular ratio against that currency which they got pegged.
As the speculators placed bets, the issuers of currency got forced to try and maintain the ratio by purchasing their currency on the open market. The government later ran out of money and was pushed to abandon the effort and this made the value of the currency to plummet. The governments feared that George Soros would start having an interest in their currency. When he did, the other speculators could ion in the fray, this was described as a group of wolves on a group of elk (“George Soros,” 2018). The big amounts of money that those speculators borrowed and leveraged made it hard for the governments to handle the assault or withstand it.
Despite the success of George Soros, it is not every Bet that he placed worked in his favor. For instance, in the year 1988, he made a prediction that the markets of the United States would rise continuously. His fund, as a result, lost $300 million in the crash process even though there were lower double digits delivered returns that year. In 1999, Soros also took a hit of $2 billion in the Russian debt crisis and lost $750 million during a technology bubble where he placed a decline bet (“Investopedia, n.d.”). He was stung by this loss and as a result, bought anticipation big in of a rise and lost about $2.9 million when the market crashed finally.
Soros’s family office has trimmed the stake in the Broadband Corp. during the first quarter, the management fund holdings of Broadband Corp reduced by seventy-four thousand shares to around 8000 million. The filing also shows the disclosed Soros’s stake of around 22 million in Vice Properties Inc. which the second-biggest holding of the firm. George Soros also increased the stake by 330, 00 in Aetna and made the holdings of Baxter International by around 340,000 shares.
According to the recent news, the billionaire is weighing moves into cryptocurrencies. A member of the of office family got internal permission to trade on cryptocurrencies which is an asset that several money managers avoid because of the track record of the sector which is limited and lack of volatility and regulation. The Soros Management Fund head of macro investing, Adam Fisher got the approval but has not made any bets yet on cryptocurrencies. The green light of the fund for cryptocurrencies came after the Bitcoin price that has served as a signal to several other cryptocurrencies. Recently, regulators have begun paying special attention to cryptocurrencies and this has scared investors off (“George Soros,” 2018). The interest in bitcoin is beginning to wan with the amounts of searches falling slowly since the start of this year.
If you interested what stocks does george soros own you can see his portfolio in details.
Where does George Soros live now

George Soros is Founder/Co-Founder of Quantum Fund . He lives in a large estate, located in the Bedford Hills suburb of New York, Katonah, USA.

Interesting facts:

One of the famous youtube videos is George Soros 60 minutes interview.
George Soros interview :

Conclusion
Trading like Soros is not for those with a light wallet or the faint-hearted. The drawbacks of the winning big and betting big is that betting big means losing big. If one cannot afford the loss, then definitely they can’t afford to resemble George Soros. While the macro hedge traders are the quite types and avoid the spotlight as they earn a fortune, George Soros is taking and has been taking public stances on several political and economic issues. His success as a speculator and public stance has put Soros in a unique personal class. During a period of more than four decades, he made the correct moves almost every time and generated a large number of fans among investors and traders and detractors among the ones on the other end of losing for his speculative activities.

QUESTIONS AND ANSWERS from comments:

How old is George Soros ?

He was born 1930. George Soros is 88 years old.

2. Who is George Soros spouse ?

Tamiko Bolton is George Soros’ third wife.

3. What is official George Soros twitter account ?
George Soros Twitter account is : https://twitter.com/georgesoros

3. What religion is George Soros ?
As we can see in the interview, George Soros is an atheist he doesn’t Believe In God.

4. Did George Soros Say His Life’s Mission Is to Destroy the United States?
No. George Soros didn’t say this. Claim (fake George Soros Newsweek 1979) “I’ve made my life’s mission to destroy the United States. I hate this country and I hate all of the people in it.” is false news. David Emery, is excellent San Francisco-based writer and he wrote several articles about fake news related to Soros.

5. Is George Soros ‘Grooming’ a Pro-Muslim Brotherhood Gubernatorial Candidate in Michigan?
Another fake news about Abdul el-Sayed George Soros’s relationship.

6. Is Chelsea Clinton Married to George Soros’ Nephew Marc Mezvinsky?
Another fake news. Based on Snopes.com , Baio didn’t provide any evidence that Marc Mezvinsky, Chelsea Clinton’s husband, was related in any way to George Soros.

7. Are 16 States Using Voting Machines from a ‘Soros-Controlled Company’?
George Soros voting machines were another fake news in media last several years. George Soros has no hand in the management or ownership of Smartmatic

8. Is adam Schiff sister married to George Soros son ?
No, George Soros’s son isn’t married to Adam Schiff’s sister.

9. Was George Soros part of the SS?
No this is not true! George Soros was not a German soldier.

10.

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