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Left Hand Side (LHS)

Left Hand Side (LHS)

What Is the Left Hand Side (LHS)?

The term left-hand side (LHS) alludes to the bid in a two-way price quote for a currency pair. A two-way price quote means both the bid price and the ask (offer) price of a security.

The left-hand side, or bid, demonstrates the price at which the dealer, trader, investor, or market maker (MM) will buy a security or currency, and the right-hand side, or ask, shows the price at which the participant will sell the security or currency.

LHS can be stood out from the right-hand side (RHS) of a currency quote, which alludes to the offered price.

Grasping the Left Hand Side (LHS)

The left-hand side is in a real sense on the left of a price quote, with the ask showing up on the right-hand side. The left-hand side is the bid price, and the highest advertised price an entity will buy at. Somebody who wishes to sell could execute with this buyer immediately.

On the off chance that a price quote is 1.0510 — 1.0515, the left-hand side price, the bid, is 1.0510, while the offer (right side) is 1.0515.

The difference between the right and left, or bid and ask, is the spread. The spread is one indicator of how much interest and activity there is in a specific market. In the event that the spread is small, that normally means there are loads of active participants attempting to outsmart each other which makes a small spread. Assuming there is a large spread, it commonly means there are less participants and those that are bidding are offering can set the rate, and in doing so will regularly need to bid lower or offer higher, making a larger spread.

On the off chance that the GBP/USD is trading at 1.2420 by 1.2422, somebody will buy the British pound versus the U.S. dollar at 1.2420. Since they are bidding at 1.2420 they are not guaranteed to have their order filled. Somebody should sell to them at that price for a transaction to occur at 1.2420. 1.2420 is the left side. If somebody has any desire to buy in a flash they could buy from the right side (offer) at 1.2422.

Illustration of the Left Hand Side in a Forex Transaction

Expect the USD/CAD two-way price quote is:

1.3010 — 1.3012

This is a two pip spread. The quote means that somebody will buy one USD for C$1.3010 (Canadian dollars). This is the left-hand side.

On the right-hand side, somebody will sell one USD for C$1.3012 (Canadian dollars).

A trader interested in making a trade could place a bid or offer at another price. They could likewise execute with the bid and offer that are there. For instance, somebody needing to sell could sell to the bidder at 1.3010. Somebody who wanted to buy could buy from the offer at 1.3012. Both of these activities would result in immediate execution, expecting the bid or offer is still there when the trader's order is placed.

Features

  • The size of the bid/ask spread is an indicator of the current liquidity in a market. A tight spread means there is great liquidity.
  • The left-hand side (LHS) alludes to the bid price in a forex quotation, since the bid price shows up on the left in a two-way price quote and the offer on the right.
  • The bid price is the highest price somebody will buy the base currency or the price at which a seller can sell the base currency in the market.