What is Bid-Ask Spread? | How Bid-Ask Spread Works in Forex Trading

Bid / Ask

The Bid is the price that the broker pays to buy from you if you are selling

The ask is the price that the broker charges you if you are the one buying

"A customer Buys at the ask and Sells at the Bid"

The bid/ask it's the price difference you have on your broker to accept the exchange rate.

Spread

Difference between the bid and ask. it represents the dealer's profit.

Volatility

The volatility of currency e is how much the price is moving over a certain period of time.

A higher volatility means that their currency's value can potentially be spread out over a larger range of values this means that the price of the currency can change dramatically over a short time period in either direction. At lower volatility means that their currencies values do not fluctuate dramatically but changes in value

The higher volatility the more opportunities you have to profit from the market but too much volatility and then it can be dangerous

There is a balance to find between too much volatility and not enough volatility.

A day trader or swing trader is highly interested in volatility because without volatility there is not much movement in the currency pair you are looking at and therefore not many opportunities for profit from the moment.

Liquidity

Ability to buy or sell an asset in large quantities without affecting the price levels. Cash is the most liquid asset.

So liquid is in easy words how much money is involved in the transaction. The more liquid a pair is the safer it is how so.? it means that if someone with a lot of money is pulling out or jumping in the currency pair, it will not affect the overall price of it.

If you are watching a highly liquid currency pair, if someone big is getting out or getting in, it will affect a lot the price of the currency pair there making it very dangerous for other traders.

So liquidity is something we want. liquid markets are markets around National days, bank holidays, Christmas time, when a lot of traders are out, and therefore if anyone with a lot of money in deciding to jump in a trade or get out of their position he will have the ability to move the market a lot bigger than if it was more liquid.