What are base and quote currencies?

The first currency in a pair is called the base currency. The second one is the quote currency. The exchange rate tells you how much of the quote currency you need to buy one unit of the base currency.

Example:

• If the rate is 1.36, it means you’ll need 1.36 US dollars to buy 1 euro.
• Or, if you sell 1 euro, you’ll get 1.36 US dollars.

What are bid and ask prices?

When you learn how to place a forex trade, two prices matter:

• The bid is what the broker pays you if you sell.
• The ask is what you pay the broker if you buy.

These prices are always slightly different.

What is the spread in forex?

The spread is the difference between the bid and the ask. This is how brokers make money.
Let’s look at this:

You sell at 1.3598 and buy at 1.3600. That 0.0002 difference is the spread.

What should you know before you place a forex trade?

To place a forex trade, you must:

1. Understand that you’re trading currency pairs
2. Know the difference between bid and ask prices
3. Check the spread to understand your real entry cost
4. Decide whether you want to buy (go long) or sell (go short)

Every trade you place in forex follows this structure.