Forex
Quote - How to Read a Currency Quote
Before trading currencies
an investor has to understand the basic terminology of the forex market,
including how to interpret forex quotes. In every foreign exchange transaction
an investor is simultaneously buying one currency and selling another.
These two currencies make up a currency pair. This is an example
of a foreign currency exchange rate of the dollar versus the yen:
USD/JPY
= 119.72
NOTE: Information on forex quotes will be provided during our free, live FX training.
The currency to
the left of the slash ("/") is called the base currency (in this example, the US dollar) and the one on the right is called
the quote currency or counter currency (in this example,
the Japanese Yen). This notation means that 1 unit of the base currency
(that is, 1 dollar) is equal to 119.72 Japanese Yen. If buying, the
exchange rate specifies how much you have to pay in units of the quote
currency to buy one unit of the base currency; in the above example,
you have to pay 119.72 yen to buy 1 US dollar. If selling, the foreign
currency exchange rate specifies how much units of the quote currency
you get for selling one unit of the base currency; in the above example,
you will receive 119.72 Japanese Yen when you sell 1 US dollar.
As with stocks,
a forex quote includes a bid price (or bid) and an ask
price (or ask). This can be easily illustrated with an example
of a currency quote taken from the forex trading software:
In the above example,
the bid price is 119.68 yen and the ask price is 119.75 yen [notice
that when the ask price is displayed, only the last two decimal places
are displayed to the right of the slash (75 instead of 119.75)]. The
bid price is the price at which dealers are willing to buy the base
currency (in units of the quote currency) and users of our software
can sell. Thus, if a trader presses the button "Sell USD,"
he/she would sell dollars at 119.68 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 system could buy it. By clicking "Buy USD,"
an investor would be buying dollars at 119.75 yen.
Even though there
are many currencies all over the world, 85% of all daily transactions
involve trading a group of currencies known as the "Majors."
These currencies include the US Dollar, Japanese Yen, Euro, British
Pound, Swiss Franc, Canadian Dollar and Australian Dollar. The four
most actively traded currency pairs are the US Dollar / Japanese Yen
(USD/JPY), Euro / US Dollar (EUR/USD), British Pound / US Dollar (GBP/USD),
and the US Dollar / Swiss Franc (USD/CHF). The US Dollar / Canadian
Dollar (USD/CAD) and the Australian Dollar / US Dollar (AUD/USD) are
also actively traded pairs. For traders, the best trading opportunities
are with the most commonly traded (and therefore most liquid) currencies;
i.e., the "Majors."
The examples below
were taken from the currency dealing system which provides forex real
time quotes. From left to right are the euro-dollar exchange rate, the
british pound-dollar exchange rate, and the dollar-swiss franc exchange
rate. All of these currency quotes are of major currency pairs.
   
Taking the example
of the euro forex quote (first pair above), buying one euro would cost
1.0099 US dollars and selling would provide 1.0093 US dollars.
If you want to see
more live currency quote examples, you can sign up for a free test drive
of our forex trading software by clicking the appropriate link below.
You will be able to obtain live forex quotes as well as place simulated
trades in real time using different currency pairs. If
you want to obtain more free forex education about currency trading,
click this link.
Sign
up for a live 30-day free demo of our software, and have access to forex
real time quotes...
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