I am new to forex, so please be kind.
I remember reading about bid and ask prices. I recall having read a long time ago that you gain on ASK (or vice versa) when you go long and you lose on BID (or vice versa) on when you go short. When I say “lose”, I’m referring to the advantage pip-wise, or profit-wise, is favored toward the broker.
Is this true? Can someone please clarify?
The bid price is the price at which you can open a short position or close a long one: it is the “sell” price. The ask price is the price at which you can open a long position or close a short one: it is the “buy” price.
If EUR/USD is quoted at 1.2202-1.2203, the bid price is 1.2202 and the ask is 1.2203. The difference, 0.0001, is the spread. 0.0001 on this pair is 1 pip.
If you buy at the ask, the bid price quoted will have to rise by 1 pip for you to break even, allowing you to “sell” or close your long position at 1.2202, the same price you got in at. So on this pair with a 1 pip spread, you would always lose 1 pip from your trade, and this profit goes to the broker.
Note that spreads can change hugely when we get near market closing times, or near news announcement, or just because the market is very busy. It will not always be 1 pip.