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I was trying to understand how Forex cross rates work. Different articles on internet uses bid price of currency to identify it's current value. My question is, why do they chose bid price and not offer price?

Usually a common stock's price is measured by its last traded value. Why don't we do the same in case of forex trading? Apologies if it is an illogical question. I am a beginner in this field.

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  • Side note to my answer - on a personal note, please reconsider trading currencies. It is a quick path to overleveraging yourself with risk, and for most people is just gambling with a fancier name. Understand it - sure; but make sure you understand the risks incredibly well before you put down any money [and if you truly understand the risks... perhaps you will decide not to do so].
    – Grade 'Eh' Bacon
    May 12, 2022 at 14:25
  • @Grade'Eh'Bacon what makes it riskier than, say, stocks? is it because people have to leverage themselves by huge multipliers to actually make any profit/loss and because they don't go up most of the time?
    – user253751
    May 12, 2022 at 14:45
  • @user253751 First, fx speculation holdings carry no inherent value promise - for every winning currency in a pair, there is a loser over the same time frame. Compare this to stocks, which carry inherent value to the extent that total economic growth increases [which historically they have, over any long enough time frame]. So fx is a 'zero sum game', whereas investing in productive assets is not. The leverage commonly used escalates the risk involved.
    – Grade 'Eh' Bacon
    May 24, 2022 at 13:48

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The bid price indicated on a live forex market [there are many - no universal source of data compared to a stock listed on a trading exchange] shows you the trade value available to you right now. A midpoint between bid and ask, or a 'most recent traded' rate [hard to quantify since there is no single exchange, but you could theoretically show the most recent traded rate within a given data set] shows you a theoretical value, not a value you could actually act on.

You say that a stock's price is typically measured by its last traded value - but that is in the context of representing the value of that currency in a general sense. If you were to actually sell that stock, you would sell it for the current bid price; if you were to actually buy that stock, you would pay the current ask price.

When calculating how to get from USD:GBP:CAD, you would need to use the actual ask price [or, from the other side, the bid price]. For other purposes, such as accounting for the value of a forex asset, sure you could use a midpoint.

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