For a spot or forward currency quote, work out and explain its bid–offer spread and say what makes that spread wider or narrower
The idea
A dealer quotes two prices for one unit of the base currency, both in the price currency: the bid, at which the dealer buys the base currency, and the offer, at which it sells. The spread is offer minus bid, in pips or as a percentage of the mid-rate, and the client always trades on the side worse for the client. Spreads widen for large trades, illiquid pairs, volatile markets, trading outside main market hours and weaker client relationships. A forward spread is the spot spread plus the spread on the forward points, so it grows with maturity. The classic trap is inverting a quote: the inverted bid is one divided by the original offer, not the original bid.
In the app: 4 practice questions on this outcome, a narrated walkthrough with diagrams, spaced review that brings it back before you forget it.
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