up the bid, down the ask

CFA Level II Economics
#1

confused about the up the bid and down the ask, for example EUR/USD, if we buy EUR/sell USD, use the bid price, if we buy USD/sell EUR, we use the ask price.

is it the same theory from the perspective of dealer and the buyer like us?

#2

I think of it as “selling X in exchnage for Y.” So start with X. In your first example, selling USD in exchange for EUR (going UP, BID). Then selling euro in exchange for USD. Going DOWN, Divide.

#3

Use whichever number gives you less of the new currency: multiply by the smaller number, divide by the larger number.

Currency dealers are not your friends.

#4

Thanks !!!

For dealer’s position, is it correct to say they have to UP the ask, down the bid?

#5

You’re welcome.

They don’t have to, but they find it more profitable.

#6

thanks s2000magician! it helps a lot!!

#7

My pleasure.

Glad to hear it.