Have you ever been confused by the quotes that are used when you open and close the deals? If you ever wondered why the deal was opened above or below the line that you see on the chart, this article is for you. Let’s make it clear once and for all!
Bid and Ask
First of all, it is important to know about the basic Ask and Bid prices. Ask price is the price at which you buy the asset. Bid is the price at which the asset is sold. Ask and Bid quotes are the quotes at which you open your CFD-type deals on the IQ Option platform. The difference between Ask and Bid prices is called Spread.
You may enable the visibility of Ask and Bid quotes in the settings menu and this is what it will look like:
So how does it work? Let’s look at an example.
Let’s say you open a deal on GBP\NZD, under the Forex tab. You make a prediction that the price will go up and open a <Long> position by clicking <Buy>:
The deal is opened at the level of the current <Ask>, 1.8589. This means that in order to close the deal in profit, the Bid quote at the moment when you close the deal has to be higher than the Ask price at which the position was opened. Basically, you want to sell the asset (close the deal) for a higher price than the one at which you bought it.
That said, remember that on IQ Option you do not actually own the asset, but rather profit from investing in the price development.
In case you predict a decrease of the price and open a <Short> position by clicking <Sell>, your deal will open at <Bid> price and in order for it to close in profit, your closing price (current <Ask>) has to be lower than the Bid price at which you opened the deal.
Average price
Alright, quite simple so far. So what is it that you usually see on the chart? That white line with a strange value, that is neither Ask nor Bid price, reflects the average price. The average price is counted with the formula (Ask+Bid)/2 and it is shown on the chart for your convenience. That is also why on our platform you see 6 digits after the dot — it is a result of the division.
Comparing quotes
Quite often traders tell us about the difference in quotes, but it is important to know how to compare them correctly. When you compare the prices with other platforms or exchanges, make sure that you compare Ask and Bid prices and make sure that you do not compare, for instance, Ask price to the average price on our platform.
If you made sure you are comparing the correct prices and the quotes do not match, remember that they might differ as platforms may have different quote providers.
If you want to check previous quotes, you may find the <Historical quotes> tab on our website. There you are able to set a certain date and time and check the Ask, Bid and average price that was displayed on the platform at that moment.
This basic knowledge is fundamental for a trader and crucial for making successful investments. Careful assessment of quotes will help you understand the chart better and plan your trading strategy accordingly.
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NOTE: This article is not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future.
In accordance with European Securities and Markets Authority’s (ESMA) requirements, binary and digital options trading is only available to clients categorized as professional clients.
GENERAL RISK WARNING
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.
77% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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