At any given time, every asset on the market has two prices:
- The 'Ask' price at which an asset can be purchased
- The 'Bid' price at which an asset can be sold.
The spread is the difference between the Bid and Ask prices.
What price is used to build a chart in Libertex?
The Bid price is displayed by default, but users can select the price they want to be displayed on the chart on the platform. To change this parameter, just click the arrow icon showing the direction and select the price display type in the dropdown menu.
In the trade window, users can see the chart display as prices in the trade direction they've selected. That could be:
The Ask price when buying an asset
Or the Bid price when selling an asset.
Let's take a look at an example.
Let's say, for example, that you've analysed the precious metals market and decided that the price of gold will go up. You buy gold at $1800 per ounce. That price is the Ask price. In 3 months, gold prices actually do go up, and you sell your ounce of gold at $2000. Now, you're a seller, which means your trade was made at the Bid price. You've accomplished your goal of making profit. Your profit is $200 ($2000 - $1800 = $200).
Of course, the opposite may happen. You have an ounce of gold, but analysis shows that the metal will decrease in value, so you decide to sell it at $1800 per ounce. In this case, the $1800 is the Bid price. After some time, you realise that gold is at its lowest price right now and should invest more in it. You buy another ounce at $1400 per ounce, which is the Ask price. This operation also brings a profit, $400 in this case: $1800 - $1400 = $400.
To avoid confusion, you just need to wrap your head around how trades are made and remember that on the Forex market (and others), when opening a buy position, the trade is made at the Ask price. When closing a buy position, the trade is made at the Bid price.
When opening a sell position, the trade is made at the Bid price. When closing a sell position, the trade is made at the Ask price.
So, when trading at the Ask or Bid price, be sure to display prices according to the corresponding type.