Bid price examples
Let’s go through two examples of a bid price – one for shares and one for forex.
Suppose Apple stock is trading at $130.50 with an offer price of $130.60 and a bid price of $130.40. You think that the price will fall, so you open a CFD to short – or sell – five contracts at the bid price of $130.40. After a few days, the share price has fallen and it is now trading at $127.40, with a bid of $127.20 and an offer of $127.60.
In this scenario, your decision to go short will have yielded a profit and you could close your position. To do this, you would reverse your trade and buy five contracts at the current offer price of $127.60.
Now let’s look at forex and suppose that EUR/USD was currently trading at $1.2450, with an offer price of $1.2480 and a bid price of $1.2420. Given a recent interest rate announcement from the Federal Reserve (Fed), you decide to short this pair on the assumption that it will decrease in value.
As a result, you decide to open a CFD position to sell five contracts at $1.2420. After a few days, EUR/USD has fallen to $1.2220, with a bid price of $1.2190 and an offer price of $1.2250. You decide to close your position to take your profit by reversing your trade – meaning that you’d buy five EUR/USD contracts at $1.2250.