What Is An Offer?

In currency trading on the Forex and other money markets, an offer is the amount one is willing to sell their currency for.  Often called the best offer or offer price, this amount is used in currency trading to find a common denominator for a currency sale to take place.  The best offer price closest to its counterpart, the best bid price, will realize the transaction.  In currency trading the offer price is often displayed right next to the bid price.  More commonly known as the sell and buy prices in this aspect, each represents the amount it costs to sell a currency and the other the amount to buy it at.  For example if you go to your local bank in the United States and attempt to sell Euros you have left over from a vacation, you will be given the bid price.  The amount the bank is willing to pay for those Euros.  If however you were to go to the same bank and try and buy Euros before you travel, you would be offered the best offer price.  The amount the bank is willing to sell Euros for in exchange for US Dollars.  The offer price will always be higher than the bid price.  The difference between these two amounts will be the bid offer spread.

Why An Offer And Bid Price?

Some may first be surprised that there is not a simple single amount for a given currency that is not dependant on location or market movement.  The reason for a best offer price and bid price in currency trading is for the very same reason it exists in the stock market, and really in any market where goods are exchanged the world over: supply and demand.  There is always a difference, often minute in currency trading, between what one is willing to pay for something, and which the opposite party is willing to part with it for.  Its simple economics: an item only has the value that another party is willing to pay for it.

Related posts:

1. What Is A Spread?
2. Forex Trading Pip
3. What Is A Market Maker?
4. What Is A Currency Converter?
5. The FX Trading Process