The bid price is the price at which a buyer is willing to purchase a currency pair. It is always lower than the ask price.

The ask price is the price at which a seller is willing to sell a currency pair. It is always higher than the bid price.

The spread is the difference between the bid price and the ask price of a currency pair. It represents the cost of trading the currency pair and is typically measured in pips. The spread can vary depending on market conditions and the liquidity of the currency pair.

Let’s illustrate this with an example:

Let's say the current exchange rate for the EUR/USD currency pair is 1.10274/1.10275.

A trader enters a long position on the EUR/USD and uses the ask price of 1.10275 to initiate their trade. If the exchange rate rises to 1.10375, he/she can sell their euros and buy US dollars back at the bid price of 1.10375 to close their position. This would represent a profit of 10 pips.

Conversely, he/she enters a short position on the EUR/USD and uses the bid price of 1.10274 to initiate their trade. If the exchange rate falls to 1.10174, they can buy their euros back and sell US dollars at the ask price of 1.10174 to close their position. This would also represent a profit of 10 pips.

In both cases, the trader would need to pay the spread of 0.1 pips. 

A pip is a unit of measurement used in forex trading to indicate the smallest change in the price of a currency pair. Most currency pairs are quoted to four decimal places; a pip is the fourth decimal place of the exchange rate. In JPY pairs, pip is the second decimal point. For example, if the exchange rate for the GBP/USD changes from 1.2500 to 1.2501, it has moved by one pip.

Also, a one-pip change in the exchange rate for USD/JPY from 110.00 to 110.01 represents a change of 0.01 Japanese yen.

A lot is a standardised unit size used in forex trading to measure the amount of a currency pair. There are three main types of lot sizes: 

Standard Lot:

A standard lot size in forex trading is 100,000 units of the base currency. The value of each pip in a standard lot is typically $10 for most currency pairs.

Mini Lot: 

A mini lot size in forex trading is 10,000 units of the base currency. This is equivalent to 0.1rnstandard lot or one-tenth the size of a standard lot. Each pip in a mini lot isrn$1 for most currency pairs.

Micro Lot:

A micro lot size in forex trading is 1,000 units of the base currency. This is equivalent torn0.01 standard lot or one-hundredth the size of a standard lot. The value of each pip in a micro lot is $0.10 for most currency pairs.

Leverage is a tool that allows you to open a larger position with a smaller amount. Think of it as money your broker gives you to trade larger positions. Your broker may offer you a certain leverage ratio, such as 50:1 or 100:1.

For example, with a 50:1 leverage ratio, you can control a position worth £50,000 with just £1,000 of your money. If the position gains 1%, you will profit £500, which isrn50 times your initial amount.

However, leverage can also increase your losses if the market moves against you. For instance, if the same position loses 1%,  you would lose £500, which is 50 times your starting amount. So, it's a double-edged sword. 

You need to deposit a certain amount, called a margin, in your trading account to use leverage. Margin is a percentage of the total trade value that you need to put up as collateral to open and maintain a position. The margin required depends on the leverage ratio and the size of the position.

For example, if you want to open a position worth £10,000 with a 50:1 leverage ratio, you would need to deposit £200 as a margin. The remaining £9,800 would be borrowed from the broker.

It's important to note that margin and leverage are closely related, but they are not the same thing. Margin is the amount of money you need to deposit to open a position, while leverage is the ratio of the position value to your margin.

Bid Price, Ask price, Spread