Margin/Spread

Beginner Questions
1

Hi

I have a quick question. i have just joined a desk where i will be picking up calls from clients and quoting them an FX price for their transaction and i just wanted to confirm one thing.

example:

client wants to sell CHF (this is quoted in USD/CHF - direct quote - client buys USD) - the bank will quote the ASK price (i.e the left side of the bid/offer on the retuers screen)

the question of MARGIN comes in.

if the client is on the left side, it is obvious the bank will ADD a 1 pip or 2 pip margin on the trade.

however if the client is buying CHF (i.e. selling USD) the bank will quote the BID price (right side)

will be SUBTRACT the 1 or 2 pips then??\

Please help clarify

thanks

2

First, you are not using the term “margin” here correctly. It does not apply to your question.

As for your inquiry, as a dealer your are offering to buy USD/CHF from the customer at the bid and/or sell it too them at the offer. The spread is the difference between the two. If you quote them the bid then your ask will be some # of pips higher. If you quote the ask, then your bid will be some # of pips lower.

3

if the client wants to buy, quote him the ASK price if the client wants to sell quote him the BID price.

Bidprice = ASK price - spread
Askprice = BID price + spread

if the client wants to close out a buy order quote him the BID price, if the client wants to close out a sell order quote him the ASK price.

I would love to know how you got a job on a forex dealer desk without knowing how to calculate the difference between the bid and the ask price lol

4

thanks for the answers… hand-picked to be a fast learner… this is the best way to self-learn!