Bid, ask and long or short positions

The essentials

Under the usual convention, you buy at ask and sell at bid. A long position benefits from a rise; a short from a fall. The relevant closing price can differ from the chart's main displayed price.

Understand the mechanism, not just the definition

A buy normally opens at ask and closes at bid; a sell opens at bid and closes at ask. This gap explains why a position can start negative without a market move. A candle built from bid also does not show every price relevant to a short position, whose close depends on ask.

Example and verification

Hypothetical quote: bid 1.1000 and ask 1.1002. Buying and immediately selling without market movement or commissions costs the 0.0002 difference. A bid-based chart may not show the ask price triggering a particular order.

Worked case, step by step

With bid 1.10000 and ask 1.10020, the spread is 2 pips if a pip is 0.0001. Buying and immediately closing means paying 1.10020 and selling at 1.10000. At 1,000 units this is −USD 0.20 before commissions. Do not subtract that spread again when the result already uses executed prices.

What to verify when applying this

Check which price forms the chart and which side triggers each order for your product. Inspect the ask line in demo and compare execution history. Not every chart-order difference is a broker error.

Practice: verify it in your environment

Learn by observing the process and keeping its data. Complete this practice in demo or using documentation, without sending real orders or adding capital for the exercise. Record differences between the example and your account specifications.

1. Enable bid and ask in demo and compare them with historical opening and closing prices.
2. Calculate from actual execution prices and add only separately recorded charges.

Test your understanding

Try the question before revealing the answer. Justify the conclusion and its assumptions rather than memorizing a number.