GEN.KOKSTrading Academy
Trading Foundations · Lesson 03 of 12

Bid, Ask, Spread, Pips and Points

Distinguish bid and ask; Calculate basic spread and pip movements; Recognize transaction costs.

  • Distinguish bid and ask
  • Calculate basic spread and pip movements
  • Recognize transaction costs
In this lesson
Learning journal
Course outline · Lesson 03 of 12
  1. Understanding Financial Markets
  2. Forex and Currency Pairs
  3. Bid, Ask, Spread, Pips and Points
  4. Candlestick Charts and Timeframes
  5. Market Structure: Trends, Swing Highs and Swing Lows
  6. Support, Resistance and Price Zones
  7. Trendlines and Channels
  8. Trading Sessions and Market Timing
  9. Risk Management and Position Sizing
  10. Trading Psychology and Discipline
  11. Backtesting and Performance Review
  12. Building a Personal Trading Playbook
Observe

Two-sided quotes

The bid is generally the price at which you can sell; the ask is generally the price at which you can buy. Ask is usually higher than bid.

The spread

Spread = ask − bid. It is one component of trading cost; commissions, financing charges, slippage and conversion costs may also apply. Spreads may widen around news or low liquidity.

Pips and points

For many non-JPY FX pairs, a pip is 0.0001; for many JPY pairs, a pip is 0.01. A broker may display fractional pips, often called points or pipettes. Always confirm instrument specifications.

Execution risk

The requested price may differ from the filled price, especially in fast markets. Stop orders and take-profit orders are not universal guarantees of a particular execution price.

Bid, ask and the spreadTap image to enlarge
Two illustrative quotes: bid 1.08500 and ask 1.08520. Their difference is 0.00020, or 2 EURUSD pips. This is a separate example from the text.
Illustration only. Two illustrative quotes: bid 1.08500 and ask 1.08520. Their difference is 0.00020, or 2 EURUSD pips. This is a separate example from the text.
Worked example

Worked example

Illustrative EURUSD bid 1.08420 and ask 1.08435 gives a 0.00015 spread, or 1.5 pips. A move from 1.08420 to 1.08520 is 10 pips.

Practise

Try it yourself

Calculate the spreads for hypothetical quotes 1.20500/1.20518 and 149.80/149.83; identify the relevant pip conventions.

Practise

Independent activity

Prepare a transaction-cost checklist for one broker instrument: spread, commission, swap/financing and potential slippage.

For your own learning. No upload, submission or approval is required. Use demo or historical practice only.

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Key terms to review

Bid, Ask, Spread, Pip, Slippage

Self-check · 5 questions

Check your understanding

Answer all five questions, then check the explanations. Retry as often as you wish.

Choose one answer per question, then check your answers. You can retry; scores are not saved.

1. A buy order usually executes near the
2. Spread equals
3. For EURUSD, one standard pip is commonly
4. For USDJPY, a standard pip is commonly
5. Which can increase trading cost?

Suggested review target: 4 of 5.

Four out of five is a suggested review target. You can open any lesson regardless of your score.