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أكتوبر 25, 2013

The Bid-Ask Spread – What Forex Traders Should Know

In forex trading, trades are commission-free; meaning there are no brokerage, exchange or market-maker costs of buying or selling. The brokerage firm benefit from the difference in bid-ask spread. Bid-ask spread is one of the forex basics that every beginner traders should be thorough.

In trading any financial instrument including currency, stocks and bonds, ask is the lowest price the seller willing to accept and bid is the highest price the buyer offer. The bid ask spread is simply the difference between the two. Market liquidity is the main factor determining bid-ask spread for an instrument. Usually the high the liquidity is so narrow the spread. That is why most traded currency pairs like EUR/USD have very tight spreads and exotic pairs have very relaxed spreads.

The bid-ask spread can be calculated from the pip difference of the currency pair. Fore example a EUR/USD quote of 1.3790/1.3792 shows a 2pip difference. Brokerage firms can offer fixed spread for trading specific currency pairs, or can offer different spread according to the liquidity of the market, or can offer fixed spreads when there is liquidity and custom spread on less-liquidity.

This blog is written for Orient Financial Brokers, a leading forex currency broker in UAE offering advanced forex trading software and a range of account features.

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ديسمبر 17, 2013

Different Behaviors of Gold in Financial Markets

The gold price shows great variations in recent past. There are periods of steady increases, consolidations, rapid declines, corrections and sharp increases. Many peoples explain these price fluctuations differently; and most of them are in fact true. The reason for these much variations and causes of variations is because gold behaves differently in different financial market. Gold is a precious metal showing characters of commodity, currency and stock.

Gold as Commodity: Gold is one of the major metal commodities and the most popular precious metal so far. Like any other commodity like oil, gas or wheat, gold prices can show various with supply and demand. But compared to other commodities the supply and demand changes do not cause any major price swings because mining gold out of the ground is getting costly and increasingly difficult.

Gold as Currency: Gold used to be a currency for buying and selling good. Gold standard was also used to value currencies till the recent past. Gold still shows very high correlation to currencies especially against US dollar and Australian dollar. Traders also tend to invest heavily in inflation and deflation.

Gold as Stock: Gold is considered as a good instrument for portfolio diversification because of its good history of price appreciation. Additionally gold is widely used as hedging tool for uncertainties in stock, bond and futures markets.

This blog is written for Orient Financial Brokers, Dubai. OFB offer spot gold trading in UAE and for traders across middle-east.