> > Key Forex Terminology: Bid, Spread, and Rollover |
Key Forex Terminology: Bid, Spread, and Rollover
Every business has its set of technical words which are distinct to that particular business. They are the characteristics of that particular business. Thus there are some terms which are exclusive to forex trading and are used by forex traders frequently while dealing in forex. Hence it makes sense that the dealer knows and understands the meaning of some of the most frequents terms in it. Three of the most commonly used words are the bid, spread and roll over.
Bid is the rate at which the dealer is ready to buy the base currency. The dealers bid various amounts for the currencies they are interested in. This is called the bid amount and is called ‘bid’. It is the same word and meaning that we use in our day to day language.
The dealer buys the currency at a particular price and then sells it at a different price. The difference between the purchase price and the selling price is called spread. Depending upon whether the spread is positive or negative, the dealer makes or loses money. The larger the difference the larger is the spread.
Very often the dealer settles the deal and rolls over the margin. When the settlement is based on the interest rate differences of the currency’s purchase price and selling price, settlement of a deal is rolled forward to a later date, say the next date. It is a very popular activity among the Forex traders. This activity helps the trader in maintaining his accounts in a more convenient manner.
Thus a thorough understanding of these three terminologies will help you deal and understand the ‘language’ of the forex market. There are few more terminologies which are frequently used and it will help you immensely if you familiarize yourself with them.
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