Bid, Ask, Spread and Lot Size in Forex Trading

Open any forex platform and you will notice something odd: every currency pair shows two prices, not one.

There is also a setting called “lot size” that decides how big your trade is.

Understanding these four terms is the first step before you place any trade, even a practice one.

What is Bid in Forex?

The bid price is the price at which you can sell a currency pair. It is what the market is currently willing to pay for the base currency.

Say EUR/USD is quoted at 1.0850 / 1.0852. The bid is 1.0850. If you want to sell one euro, you’d receive 1.0850 US dollars for it.

A simple way to remember it: The market bids to buy from you, so the bid is your selling price.

What is Ask in Forex?

The ask price, also called the offer, is the price at which you can buy a currency pair. It is what the market wants in exchange for the base currency.

In the same EUR/USD quote of 1.0850 / 1.0852, the ask is 1.0852. To buy one euro, you’d pay 1.0852 US dollars.

The market is asking this much from you, so the ask is your buying price.

What is Spread in Forex?

Spread is the difference between the ask price and the bid price.

It is one of the basic costs of trading and is usually measured in pips. A pip is the smallest standard price move, which is 0.0001 for most pairs, including EUR/USD.

The formula is simple:

Spread = Ask − Bid

For EUR/USD at 1.0850 / 1.0852:

• Ask − Bid = 1.0852 − 1.0850 = 0.0002
• 0.0002 = 2 pips

So the spread here is 2 pips. A smaller spread generally means a lower trading cost.

Bid, Ask and Spread Example

Let’s put the three terms into one quote.

Now imagine you buy at the ask price of 1.0852 and close the trade immediately.

Closing a buy means selling. So, you would exit at the bid price of 1.0850.

The price hasn’t moved at all, yet you’re down 2 pips. That is the spread at work: every trade starts with a small gap to cover.

What is Lot Size in Forex?

Lot size is the volume of a trade, meaning how many units of the base currency you are buying or selling.

Instead of trading one euro at a time, forex trades are placed in standard bundles called lots.

Nano lots are not offered everywhere, so check what a platform supports. Pip values are approximate and are shown in US dollars.

Why Lot Size Matters

A bigger lot size means each pip move changes your profit or loss by a larger amount.

The same price movement feels very different depending on the size of the trade.

Take a 10-pip move in EUR/USD:

• On a micro lot, 10 pips is roughly $1.
• On a mini lot, it’s roughly $10.
• On a standard lot, it’s roughly $100.

The move is identical, but the outcome grows with the lot size, in both directions.

A larger lot can increase gains and it can increase losses just as quickly.

That is why beginners usually practise with small sizes first.

How Bid, Ask, Spread and Lot Size Work Together

Here’s one short example that combines everything.

EUR/USD is quoted at 1.0850 / 1.0852, and you decide to buy one mini lot (10,000 units).

1. You buy at the ask: 1.0852.
2. The spread is 2 pips.
3. A mini lot is worth about $1 per pip, so the spread costs you roughly $2.
4. If you traded one micro lot instead, the same spread would cost about $0.20.
5. If you traded one standard lot, it would cost about $20.

The quote tells you the price, the spread tells you the cost per pip, and the lot size tells you how much that cost is worth in real money.

Quick Recap

• Bid is the price at which you sell.
• Ask is the price at which you buy, and it’s always slightly higher than the bid.
• Spread is Ask − Bid, usually measured in pips, and works as a basic trading cost.
• Lot size is the trade volume: standard (100,000), mini (10,000), micro (1,000) and sometimes nano (100).
• A larger lot size makes every pip move count for more, in both profit and loss.

Forex trading involves risk. Beginners should learn the basics and practise carefully before trading with real money.

This article is for educational purposes only and is not financial advice.