What Is the Bid Price in Trading? Definition, Function, and How It Affects Spreads

Definition:

The bid price is the highest price a buyer is currently willing to pay for a financial instrument, such as a currency pair, stock, or commodityExplanation:
In trading, the bid price represents the buying side of the market—it’s what buyers are offering to pay right now. It forms one side of the two-way quote:

• Bid Price → what buyers are willing to pay
• Ask Price → what sellers are willing to accept

In Forex and most CFD markets:

• A Sell (Short) position is opened at the Bid price
• A Buy (Long) position is not opened at the bid price—it’s opened at the Ask price
• When you close a Buy, it’s done at the Bid price

This distinction is crucial for understanding entry/exit levels, calculating spreads, and avoiding execution confusion.

Example:

If EUR/USD is quoted at 1.1050 / 1.1052:

• Bid Price = 1.1050
• If you open a Sell position, it executes at 1.1050
• If you close a Buy position, it also executes at 1.1050
• The Ask price (1.1052) is used for opening Buy positions

Related Terms:

Ask Price, Spread, Order Execution, Market Order, Liquidity, Slippage

Category:

Trading / Price Quoting

FastPip Tip:

Knowing which price your order hits—Bid or Ask—prevents costly mistakes. Short trades open and close at Bid, while Buy orders open at Ask but close at Bid.