Understanding Forex Quotes

At this level, we will explain how to understand a Forex quote in a straightforward manner. Here are the key points:

• Currency Pairs:
  • In Forex, currency pairs are always traded.
  • Each pair consists of two currencies, such as EUR/USD, where the euro is the first (base currency), and the US dollar is the second (quote currency).

• Bid and Ask Prices:
  • In a quote, you’ll see two prices: the bid price and the ask price.
  • The bid price is what the market is willing to pay for the base currency.
  • The ask price is what the market is willing to receive for the base currency.

• Spread:
  • The difference between the bid price and the ask price is called the “spread.”
  • The spread is the broker’s profit and also your cost when making a trade.

• Interpretation:
  • If you see a quote like EUR/USD = 1.2000/1.2005, it means that one euro is quoted at 1.2000 dollars to buy (bid) and at 1.2005 dollars to sell (ask).
  • If you want to buy euros, you’ll pay 1.2005 dollars for each euro.
  • If you want to sell euros, you’ll receive 1.2000 dollars for each euro.

• Base and Quote Currencies:
  • The base currency is presented in terms of the quote currency.
  • In EUR/USD = 1.2000/1.2005, the value of the euro is shown in US dollars.