This difference is called the spread and is where the broker earns money for executing the trade. The price to buy a currency will typically be more than the price to sell the currency. Traders will always be looking to buy forex when the price is low and sell when the price rises or sell forex in anticipation that the currency will depreciate and buy it back at a lower price in the future. This may seem confusing as it is only natural to think of “bid” in terms of buying so just remember the bid/ask terminology is from the broker’s perspective. The bid (SELL ) price is the price that traders can sell currency at, and the ask (BUY) price is the price that traders can buy currency at. When trading forex, a currency pair will always quote two different prices as shown below: This is unusual as you cannot physically hold fractions of one cent but this is a common feature of the foreign exchange market. Sticking with the earlier EUR/USD example, it is clear to see that one Euro will cost one dollar, 14 cents and 04 pips. The price of the first currency is always reflected in units of the second currency. For example, the Euro is shortened to EUR and the US dollar to USD.īase currency and variable currency: Forex quotes show two currencies, the base currency, which appears first and the quote or variable currency, which appears last. This means each country’s currency is abbreviated to three letters. ISO code: The International Organization for Standardization (ISO) develop and publish international standards and have applied this to global currencies. In order to read currency pairs correctly, traders should be aware of the following fundamentals of a forex quote: This example is presented below:Įxample of EUR/USD forex quote Understanding Forex Quote Basics The same quote will be used throughout this piece to keep the numbers consistent.
The following sections will expand on the different aspects of a forex quote. Brokers will typically quote two prices for any currency pair and receive the difference ( spread) between the two prices, under normal market conditions. For example, the price of one Euro may cost $1.1404 when viewing the EUR/USD currency pair. These quotes always involve currency pairs because you are buying one currency by selling another. What are forex quotes?Ī forex quote is the price of one currency in terms of another currency.
Since a trader’s profit or loss is determined by movements in price (the quote), it is essential to develop a sound understanding of how to read currency pairs. Top tips to understand and interpret a forex quoteįorex quotes reflect the price of different currencies at any point in time.This article covers the most important aspects of a forex quote that all traders must know – including top tips on how to read a currency pair:
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