The bid is the price at which a client can sell a currency pair; the ask is the price at which the client can buy it. The ask is always the higher of the two quotes. A buy order is filled at the ask and closed at the bid, so a new position opens at an unrealised loss.
Why a buy is filled at the ask
Every quote is two-sided because there are two counterparties to every transaction. The client buys where the other side sells — the ask — and sells where the other side buys — the bid. Charts usually plot the bid line only, which is why a long position appears to open slightly above the chart price.
The mechanical consequence is that a position starts negative. Buy EUR/USD at an ask of 1.08445 and the position is immediately valued against the bid of 1.08432; it shows an unrealised loss until the bid rises to the entry ask. A short position works in reverse: sold at the bid, valued against the ask. This is a statement of how the arithmetic works, not of how likely any outcome is.
The difference between the two quotes is the spread; its types, its size and how it is charged belong to the lesson What is spread in forex.
Reading a five-decimal quote
A quote shown as 1.08432 / 1.08445 has five decimals. The fourth decimal is the pip; the fifth is a fractional pip, also called a point or pipette. The gap between the two quotes here is 0.00013, which is 1.3 pips.
Yen pairs are quoted with three decimals instead of five — 157.482 / 157.501 — where the second decimal is the pip and the third is the fraction. The same reading rule applies: bid on the left, ask on the right, ask always higher.
Calculator: convert a quoted difference into your account currency with the pip calculator.
Where the two quotes come from
Both sides of the quote are supplied by whoever is willing to transact — liquidity providers, banks and market makers streaming prices into the platform. The bid is the best price currently offered by a buyer, the ask the best price asked by a seller, and both change as that flow of orders changes.
When available volume thins — around major releases, at session changeovers, at the daily rollover — the two quotes move apart, and both can jump at once. Pending orders resting between them are affected accordingly: the level at which an order is triggered and the level at which it is valued are not the same quote.
