Understanding Forex Quotes & How to Use Them When Trading Forex

By Arman Logan

It's quite simple to read and understand forex quotes, if you just remember two things, which are very important.

1. The first thing to remember is that, the number which is listed on the left is called the base currency.

2. And the second thing to keep in mind, that the value of the base currency is always 1 and it never changes.

US dollar is the most traded money in forex market, and it's usually considered as the base currency for quotes. If the base currency is USD, then the number on the right will show how much of that currency you are able to buy for $1 US dollar.

When USD is the base money and the quote of the currency on right raises, it means that USD has become stronger compared to the other currency, which means you will be able to buy more of that money for the same price of $1 US dollar. If the quote rises, that means base money becomes stronger. If it falls, then the base currency weakens.

Exceptions

There are three exceptions to the rule I've explained above:

1. British pound (GBP)

2. Australian dollar (AUD)

3. Euro (EUR)

For these currencies, when USD is not the base one, a rising quote means the US dollar is weakening and can buy less of the other currency.

Simply, when a quote goes high, the base currency becomes stronger. If the quote goes down, the base weakens.

Cross currencies

There are some pairs, which don't include US dollar. Those pairs are called cross currencies. The above rules apply to them as well.

Bid & Ask

Forex quotes consist of two sides: bid and ask.

BID is the price at which you can SELL base currency.
ASK is the price at which you can BUY base currency.

A Pip

Forex prices are often quoted in tiny increments called pips, which stands for "percentage in point". A pip means the fourth decimal point out, or 1/100th of 1%.

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