Understand basic forex terminology.
The type of currency you are spending or getting rid of, is the base currency. The currency that you are purchasing is called quote currency. In forex trading, you sell one currency to purchase another.
The exchange rate tells you how much you have to spend in quote currency to purchase base currency.
A long position means that you want to buy the base currency and sell the quote currency. In our example above, you would want to sell U.S. dollars to purchase British pounds.
A short position means that you want to buy quote currency and sell the base currency. In other words, you would sell British pounds and purchase U.S. dollars.
The bid price is the price at which your broker is willing to buy base currency in exchange for quote currency. The bid is the best price at which you are willing to sell your quote currency on the market.
The ask price, or the offer price is the price at which your broker will sell base currency in exchange for quote currency. The ask price is the best available price at which you are willing to buy from the market.
A spread is the difference between the bid price and the asking price.