Once traders know and understand ways to read a forex quote, he or she will be more familiar with the terminology. Starting from a currency pair that tells the currencies involved within a trade.
Usually, in the forex quote, a bid and ask price comes after the currency pair. The bid and ask price represent the number of pips the trading and forex spread between the broker’s ask and bid price. Understanding those terms a little deeper, help you set your initial trade.
The Currency Pairs
In a forex quote, you will always find two currencies. It calls a currency pair, consisting of a base currency and a quote (or counter) currency. These pairs show the currencies you are currently trading.
The first currency in the pair is the base currency, meanwhile the second is the quote currency. The popular base currencies are USD (US Dollars), EUR (Euro), GBP (British Pounds), and AUD (Australian Dollars).
The quote currency, on the other hand, can be any other currencies or the other common base currency. Take this as an example, EUR/USD = 1.3600.
In the example, the EUR is the base currency, meanwhile, the USD is the quote USD currency. This pair means one Euro is worth 1.36 US Dollars. No matter what currency that becomes the base, it always equals to 1.
The quoted amount is 1.3600 that is the amount of the quote currency for 1 unit base currency.
The Bid and Ask Quote
The second part of a forex quote is a bid and an ask price. To help you, read this forex quote, for example, EUR/USD = 1.3600/05.
On that example, the bid is 1.3600, while the asking price is 1.3605. Normally, the different price between the bid and ask price is very small, less than 1/100th from the currency unit. Thus, the convention is only in the last two digits.
These two price usage is from the perspective of the forex broker. When you are a potential buyer, then the broker asks for a little more than what he may bid if you are selling.
The Spread and the Pips
In the forex market you will hear the term ‘pip’ often. It represents the smallest unit of value within the forex currency quote. In the same quote example we use above, the difference between the 1.3600 bid and the 1.3605 ask is 5 pips.
The spread from that example is 5 pips.
