How To Read Forex Quotes
Monday 8 November 2010
It is important for an investor to understand how to interpret forex quotes as well as the basic terminology of the forex market, before he starts trading. Each foreign exchange transaction involves the simultaneous buying of one currency and the selling of another. It is said that both of these two currencies make up a specific currency pair. An example of a currency quote (exchange rate) of the dollar versus the yen is:
The currency to the left of the forward slash ("/") is called the base currency and the one on the right is called the quote currency or counter currency. In the example above, the US Dollar is the base currency in the quote and the Japanese is the counter currency. The notation above means that 1 dollar is equal to 105.24 yen; in other words, one unit of the base currency is equal to 105.24 units of the counter currency (or whatever number is shown instead of the 105.24). If you are buying, the exchange rate specifies how much of the quote currency you have to pay to buy one unit of the base currency. For the example above, 1 US Dollar costs 105.24 Japanese Yen. On the other hand, if you are selling, foreign exchange quote specifies how much units of the counter currency you will receive if you sell one unit of the base currency. You will receive 105.24 yen when you sell one US Dollar.
As with every financial commodity, a forex quote includes a bid price (or bid) and an ask price (or ask). Look at the example below that was taken from a live quote of our free forex trading software:
In the example above, the bid price is 114.84 yen and the ask price is 114.88 yen [the dark blue digits above represent the last two digits of the quote]. The dealers are willing to buy the base currency at the the bid price, so users of our software can sell at this price. Therefore, if an FX trader presses the "Sell" button, he would sell dollars at 114.84 yen. The ask price, on the other hand, is the price at which dealers are willing to sell the base currency and users of our software could buy it. By clicking "Buy," an investor would be buying dollars at 114.88 yen.
Despite the fact that there are many different currencies all over the world, 85% of all the daily trading volume is concentrated in a small group of currencies known as the "Majors." The "major" currencies include U.S. Dollar (USD), the Japanese Yen (JPY), the Euro (EUR), the British Pound (GBP), the Swiss Franc (CHF), the Canadian Dollar (CAD) and the Australian Dollar (AUD). The major currency pairs that are traded the most are EUR/USD, USD/JPY, GBP/USD, and USD/CHF. USD/CAD and AUD/USD are also actively traded, but not as much as the others mentioned. The major currency pairs (most liquid) are the ones that offer forex traders the best opportunities.
Live Forex Quotes
The live forex quotes below were taken from the forex software. The first example is a quote for the euro versus the dollar, the second example shows the pound versus the dollar, and the third exchange rate is for the dollar-swiss franc. All of these forex quotes are of major currency pairs.
The first example above indicates that buying one euro would cost 1.2434 US dollars and selling would generate 1.2431 US dollars.
To see actual live quotes of different currencies, you can sign up for a demo of our free trading platform by clicking the appropriate link below. With the software, you will also get to trade different currency pairs in the live market.
USD/JPY = 105.24
The currency to the left of the forward slash ("/") is called the base currency and the one on the right is called the quote currency or counter currency. In the example above, the US Dollar is the base currency in the quote and the Japanese is the counter currency. The notation above means that 1 dollar is equal to 105.24 yen; in other words, one unit of the base currency is equal to 105.24 units of the counter currency (or whatever number is shown instead of the 105.24). If you are buying, the exchange rate specifies how much of the quote currency you have to pay to buy one unit of the base currency. For the example above, 1 US Dollar costs 105.24 Japanese Yen. On the other hand, if you are selling, foreign exchange quote specifies how much units of the counter currency you will receive if you sell one unit of the base currency. You will receive 105.24 yen when you sell one US Dollar.
As with every financial commodity, a forex quote includes a bid price (or bid) and an ask price (or ask). Look at the example below that was taken from a live quote of our free forex trading software:
In the example above, the bid price is 114.84 yen and the ask price is 114.88 yen [the dark blue digits above represent the last two digits of the quote]. The dealers are willing to buy the base currency at the the bid price, so users of our software can sell at this price. Therefore, if an FX trader presses the "Sell" button, he would sell dollars at 114.84 yen. The ask price, on the other hand, is the price at which dealers are willing to sell the base currency and users of our software could buy it. By clicking "Buy," an investor would be buying dollars at 114.88 yen.
Despite the fact that there are many different currencies all over the world, 85% of all the daily trading volume is concentrated in a small group of currencies known as the "Majors." The "major" currencies include U.S. Dollar (USD), the Japanese Yen (JPY), the Euro (EUR), the British Pound (GBP), the Swiss Franc (CHF), the Canadian Dollar (CAD) and the Australian Dollar (AUD). The major currency pairs that are traded the most are EUR/USD, USD/JPY, GBP/USD, and USD/CHF. USD/CAD and AUD/USD are also actively traded, but not as much as the others mentioned. The major currency pairs (most liquid) are the ones that offer forex traders the best opportunities.
Live Forex Quotes
The live forex quotes below were taken from the forex software. The first example is a quote for the euro versus the dollar, the second example shows the pound versus the dollar, and the third exchange rate is for the dollar-swiss franc. All of these forex quotes are of major currency pairs.
The first example above indicates that buying one euro would cost 1.2434 US dollars and selling would generate 1.2431 US dollars.
To see actual live quotes of different currencies, you can sign up for a demo of our free trading platform by clicking the appropriate link below. With the software, you will also get to trade different currency pairs in the live market.
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