Im brand new to FOREX and have been using babypips SCHOOL to learn how it all works. I completed the pre-school basics test at the end of the section, but cant understand why I got one question (T/F) incorrect…It goes like this…
Q. There are 2 quotes when looking at the price of a currency pair. The bid is the price that you can buy the currency and the ask is the price you can sell the currency the difference between these two is called the spread
A. true or false (correct answer is false)
I’ve had a mental block (or just being dumb), but why is this false ? the second sentance is true right…so I guess Im not reading/understanding the first sentance.
be gentle, Im obviosuly missing something so simple its un true !!!
Before I answer your question you should know that this stumped me also until I racked my own brain over it, then went to someone who knows more than I do to get it right. So as a newbie, DON’T feel stupid for missing this one. Haha. Here is how we would rephrase the question to make it true:
There are 2 quotes when looking at the price of a currency pair. The bid is the price that is [I][B][U]OFFERED[/U][/B][/I] for you to buy the currency and the ask is the price you is [I][B][U]OFFERED[/U][/B][/I] for you to sell the currency the difference between these two is called the spread.
See? The Bid/Ask prices are not fixed prices. You can click on them and encounter slippage until the price is filled. They are only offers not necessarily where you will get filled.
This one is FAR too tricky for a beginners questionaire!
The funny thing is that there must have been countless other traders to take the quiz, and get it wrong, and never knew why but didn’t want to ask (Myself included). I APPLAUD YOU FOR DOING SO! Some people can never admit that they are wrong, and that will KILL you in forex!
Q. There are 2 quotes when looking at the price of a currency pair. The bid is the price that you can buy the currency and the ask is the price you can sell the currency the difference between these two is called the spread
Here is the significant paragraph from babypips school.
The bid is the price in which the dealer is willing to buy the base currency in exchange for the quote currency. This means the bid is the price at which you (as the trader) will sell.
The ask is the price at which the dealer will sell the base currency in exchange for the quote currency. This means the ask is the price at which you will buy.
The difference between the bid and the ask price is popularly known as the spread.
The “bid” is the lower price of the two, therefore when selling (or
going short) a currency, this is the price you pay, but your account
status will start at the “ask” price, this then creates the spread.
ie 1.7445/49, the spread here is 4 pips, sell @ 1.7445, start @ 1.7449,
going down.
So to make the answer true we have.
There are 2 quotes when looking at the price of a currency pair. The bid is the price that you can sell, go short the currency and the ask is the price you can buy, go long the currency the difference between these two is called the spread.
Lol, at least it’s not like some of the professors I had who would change just ONE seemingly innocuous word that would render the true/false sentence the OPPOSITE of what you were expecting it to be.