What Is A Two-Way Price?

A two-way price is a term most often used in the currency trading markets, but can also be found in trading bonds. A two-way price is when an investor is given the best bid and ask price for a currency. Using this information an investor can decide whether to make a sale of a given currency if the difference between the two would represent profit for him. The difference between the two-way price is often called the spread, and can be only hundredth of a unit of measure of a given currency, known as a pip. While often small differences, these amounts add up quickly in large volume exchanges of international currencies such as those executed by major banks. The amount of value that compromises the two way price is based on the current value of the currency involved in the quote at that given moment. With this in mind, a two way price quote will change if not executed very quickly after its issuance.

Why Both Prices?

The major advantage to having the two sets of prices shown when one is looking to purchase or sell a given currency should be obvious: if one knows what something they may is both buying for and selling for at its peak, they can make a more educated decision in whether or not to buy. In currency trading a given unit of money from any nation is subject to rapid change without warning. The more one can know about a given commodity before moving it, the more they can protect their investment. A two way price quote however can give no indication as to the future value of a currency. The quote is only for the moment, and in currency trading those moments come and go in the blink of an eye.

Related posts:

1. What Is An Ask?
2. What Is A Bid?
3. What Is A High Stock?
4. How Do A Bid And Ask Work In Stock Trading?
5. What Is A Low Stock?