Forex basics: How to Read Forex Quotes?

Forex Quotes

The first currency in a currency pair is called Base Currency. The value of the base currency is always 1. The second currency in a currency pair is called Secondary Currency. For instance, EUR/USD = 1.4620 means EUR 1.00 can be exchanged into USD 1.4620.

Pip

Pips, or “percentage in point” is the smallest decimal point in a currency pair. Currency pairs that do not involve Japanese yen have four decimal points. Thus, one pip for currency pairs that do not involve Japanese yen is 0.0001. Currency pairs that do involve Japanese yen have two decimal points. Thus, one pip for currency pairs that do not involve Japanese yen is 0.01.

Bid Price

Bid price is the selling price from trader’s point of view. It is the price that the market is willing to pay for a particular currency pair at the time of trading.

Ask Price

On the other hand, ask price is the buying price from trader’s point of view. It is the price that the market is willing to sell for a particular currency pair at the time of trading.

Spread

Spread is the difference between bid price and ask price.

Let’s look at an example, EUR/USD 1.4620/1.4622. The quote above shows EUR/USD 1.4620/1.4622, which means the bid price of EUR/USD is 1.4620 and the ask price of EUR/USD is 1.4622. The spread is 0.0002 or 2 pips.