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Home : Forex 101 Classroom : Reading Forex Quotes

Understanding Forex Quotes

Reading Forex quotes is easy although it looks a bit confusing at the beginning.

Quoting Foreign Currency

Currencies are always quoted in pairs. Each pair of currencies thus constitutes an individual product and is traditionally noted XXX/YYY, where YYY is the ISO 4217 international three-letter code of the currency into which the price of one unit of XXX currency is expressed. The first currency in the quotes act as the 'base currency'. For example USD/JPY, EUR/GBP, and GBP/AUD, in such cases, USD, Euro Dollar, and Britain Pound are acting as the base currency. Base currency in a Forex quote will always has a value of 1. USD/JPY indicates how much Japanese Yens you can buy with 1 United States Dollar; similarly EUR/GBP indicates the exchange rate of Great Britain Pound with 1 Euro Dollar.

Quoting Currency Price

There are sometimes that you can only see one price but often currency exchange price are display in pairs with 'bid price and ask price'. For example EUR/USD 1.2385/1.2390, 1.2385 is known as the bidding price, while 1.2390 is the asking price. Bidding price is the price that you sell the base currency (EUR in our case here); asking price is the price that you buy the base currency. The different of the bidding and the asking price is called 'spread'.

You might notice that bidding price is always lower than the asking price. Ever wonder why? The different of the bid-ask price (socall 'spread') is how currency brokers make profits without charging commissions to their clients (sell high and buy low in the same time.)

Example of Forex Quotes

To help beginners get used to the Forex quotes, here are some quick examples:

EUR/USD 1.2385/1.2390

Base currency= Eur

Bid price= 1.2385; Ask price= 1.2390

When selling Euros, 1 Euro = USD$1.2385; when buying Euros, USD$1.2390 = 1 Euro.

Spread = | 1.2385 - 1.2390 | = 0.0005

EUR/JPY 127.95/128.00

Base currency= Eur

Bid price= 127.95; Ask price= 128.00

When selling Euros, 1 Euro = JPY127.95; when buying Euros, JPY128.00 = 1 Euro.

Spread = | 127.95 - 128.00 | = 0.05

GBP/USD 1.7400/10

Base currency= GBP

Bid price= 1.7400; Ask price= 1.7410

When selling Pound, 1 Pound = USD$1.7400; when buying Pound, USD$1.7410 = 1 Pound.

Spread = | 1.7400 - 1.7410 | = 0.001

USD/JPY 119.8

Base currency= USD

No bid-ask price is displayed, spread value not available.

Moving forward, we will take a look on Margin Trading in Forex market.