Forex Quote Basics
Understanding a Forex quote is pretty much a prerequisite for being a successful trader. If you do no understand what a quote is or how it works, you won't be able to place profitable trades. Here are the basics of what to expect when dealing with this information from your broker.
"To make pips...or not to make pips. That is the question."
Ok, that's not really a foreign exchange quote. A quote is a piece of pricing information that you get from a broker about a particular currency pair. It tells you how much one currency is worth against another currency.
How To Read
When looking at Forex currency pairs, it is important for you to read their quotes in the correct manner. Remember that the first currency in the pair is known as the "base currency" and the second currency in the pair is known as the "quote currency."
The next thing to keep in mind is that the value of the base currency is always equal to 1 unit. This means that the quote you get for the quote currency is how many of that currency it takes to make one of the other. For example, if you see a quote that says the quote currency in the pair is quoted as 1.1428, that means that it takes 1.1428 units of the quote currency to equal one unit of the base currency.
When you look at a quote and the quote currency is increasing, it essentially means that the base currency is growing in value. For example, if you look at the GBP/USD pair and the quote keeps increasing, it means that the Great Britain Pound is growing in value relative to the United States dollar.
Bid and Ask
If you're looking at quotes and talking with other traders, you may hear the terms "bid" and "ask" thrown around. If you're a bit confused about these terms, they are actually quite simple to understand. The bid price equals the amount that you can sell the base currency at. The ask price equals the amount at which you can buy the base currency.
What to Remember
When you trade in the Forex market, it is important to remember what you are trying to accomplish. Regardless of what the base currency is being quoted at, your ultimate objective is to make money. This means that once you place an order, you need to know which direction the currency must go for you to be profitable. For example, if you are trading the GBP/USD, you want the quote to increase after you place a buy order. This means that the Great Britain Pound is increasing in value and you're making cold hard cash.
Return From Forex Quote to Definition of Foreign Exchange
Return From Forex Quote to Forex Trading