Two prices, always
Every tradable instrument is quoted with two prices, not one. The bid is the price at which you can sell, and the ask (sometimes called the offer) is the price at which you can buy. The ask is always slightly higher than the bid. When you see a single 'price' on a chart it is usually the mid-point between the two, but your actual fills happen at the bid or the ask depending on your direction.
Reading the quote correctly is the difference between expecting one entry price and getting another. If EUR/USD is quoted 1.0849 / 1.0851, you buy at 1.0851 and sell at 1.0849. The moment you open a buy, your position shows a small unrealised loss equal to the spread — because to close it you would sell back at the lower bid.
The spread is your entry cost
The gap between the bid and the ask is the spread, and it is effectively the cost of getting into a trade. A tighter spread means less of a hurdle to overcome before a position turns profitable. Spreads widen and narrow with liquidity: the major pairs during active London and New York hours tend to show the tightest spreads, while thin overnight sessions or fast news events can widen them sharply.
On an ECN-style account such as OTOFX Raw, spreads are streamed directly from tier-1 liquidity providers and can start at 0.0 pips, with a separate, clearly stated commission instead of a marked-up spread. That separation lets you see your true cost rather than having it hidden inside a wider price.
Counting pips and points
For most pairs a pip is the fourth decimal place: a move from 1.0850 to 1.0851 is one pip. Many platforms also quote a fractional fifth decimal, called a pipette or point, allowing finer pricing. The big exception is yen pairs, where the pip is the second decimal place — a move from 150.20 to 150.21 in USD/JPY is one pip.
Knowing this matters because your profit, loss and spread are all measured in pips. If a quote shows a 0.8 pip spread on EUR/USD and you trade one standard lot worth roughly $10 per pip, your entry cost is about $8 — a number you can calculate before you ever click buy.
Key points
- Bid: the price you sell at (the lower of the two).
- Ask / offer: the price you buy at (the higher of the two).
- Spread: ask minus bid, expressed in pips — your cost to enter.
- Pip: 0.0001 for most pairs; 0.01 for yen pairs.
Putting it together
Suppose you want to buy one mini lot of GBP/USD quoted 1.2630 / 1.2632. You buy at 1.2632. For the trade to break even you need the bid to rise to 1.2632, because you close a long by selling at the bid. If the market then trades 1.2680 / 1.2682, you can sell at 1.2680 for a gain of 48 pips — the 50-pip rise in the ask minus the 2-pip spread you paid on entry.
Key takeaways
Always read the quote as two prices: you buy at the ask and sell at the bid, and the spread between them is your entry cost. Tighter spreads and transparent commissions lower the bar your trade must clear to become profitable. Master pip counting early, because every figure that follows in this academy — spread, stop distance, profit target and position size — is expressed in pips.
Knowledge check
Test what you've learned
1.At which price do you buy when opening a position?
2.On a yen pair such as USD/JPY, where is one pip located?