Lesson 2 Flashcards

Question

What is Selling Price (Bid Price)?

Answer 1

This is the price at which you can sell a currency to the market. It's the price the buyer is willing to pay.

Answer 2

In the FX market, the spread is the difference between the buying price (ask price) and the selling price (bid price) of a currency pair. It's like the markup a currency dealer charges for their service. For example, if a currency can be bought for $1.20 and sold for $1.18, the spread is $0.02. This small difference is how brokers make money on each trade.

Answer 3

Small Spread

Answer 4

Big Spread

Answer 5

Increased Competition: With many buyers and sellers in the market, they compete to offer the best prices. Buyers compete to pay slightly more to ensure their orders are filled, and sellers compete to accept slightly less to quickly sell their currency. This competition narrows the gap between the bid and ask prices, reducing the spread.

Answer 6

Imagine two markets: one for apples and one for rare exotic fruits. Apple Market (Major Currencies): Many people buy and sell apples every day. If a farmer suddenly brings in a large batch of apples (an economic event), there are enough buyers and sellers to handle this change smoothly. Prices might drop a little due to the surplus, but because many people are constantly trading apples, the price quickly stabilizes. Exotic Fruit Market (Exotic Currencies): Few people buy and sell these rare fruits. If a rare fruit suddenly becomes available in large quantities (an economic event), there aren’t enough buyers and sellers to quickly handle this change. Because the market is small, this big change causes prices to swing wildly – either dropping a lot if there’s a surplus or rising sharply if there’s a shortage.

Answer 7

Connection to Currency Trading: Major Currencies: These currencies (like USD, EUR) are traded in high volumes. Many buyers and sellers are always active. When news or events happen, the impact is spread out across many trades. This means any price change is moderated by the sheer volume of trading activity. Example: A new economic policy in the US might cause the USD to change slightly, but because millions of trades happen daily, the price change is absorbed and stabilized quickly. Exotic Currencies: These currencies (like TRY, ZAR) are traded in lower volumes. Fewer buyers and sellers are involved. When news or events happen, the impact is concentrated because there aren’t many trades to buffer the change. Example: A political event in Turkey might cause the TRY to change drastically because there aren’t many trades happening. Each trade has a larger impact on the overall price, leading to bigger swings.

Answer 8

Traders, Currencies, and Prices

Answer 9

1 - Spread of Impact 2 - Stability 3 - Liquidity

Answer 10

one of many

Answer 11

at or near the current price (Traders)

Answer 12

assets (currencies)

Answer 13

Like The sweden currency, it is pronounced as "KROH-neh"