Reading a Forex Quote for profitable forex trading

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Though there are so many currencies in the world there are seven major currencies in world that are most commonly traded at the Forex marketplace. The most widely traded currencies are US dollars (USD), European euros (EUR), United Kingdom pounds (GBP), Australian dollars AUD, Japanese yen (JPY), Swiss francs (CHF) and Canadian dollars (CAD).  Forex market or Foreign exchange market is governed by so many factors including the economic factors, political scenario, market trend and of course the Force factors. All these factors influence the currencies at the global Forex market and the result is frequent changes in the currency prices. The Forex quotes that are streamed at the real time present the value of the currencies at the Global Forex market. These quotes are presented to the trader through the automated Forex trading systems that collect the information over the internet. On the basis of these Forex quotes traders take the trading decisions at the Forex market.

A good deal of traders, especially who are new to the world of Forex trading finds it difficult to read the Forex quotes that are displayed at their console by the software. But to carry out trading at the Forex market successfully it is essential that you can flawlessly read these Forex quotes understand what the quotes mean. To help you read the Forex quotes, here we are presenting an in depth discussion on how to read the Forex quotes. But before we do that let us give you a brief introduction on how the trading is done at the Forex market as that will help you to understand the Forex quotes in that context.

In Forex market trading is done between two currencies that mean you are trading one currency in respect to the other. Therefore, a Forex quote always has two currencies. You are presented with a quote by your broker that presents the spread of bid and ask price and if you opt to that quote the trade is executed. So it is quite understandable that reading the quote is important as that is the basis of the trade.

The basic Forex quote is presented with the combination of two currencies that form the pair. The currencies are denoted in the three letter code as per the ISO 4217 international standards. In this method the quote is presented in form of XXX/YYY, where the XXX represents the base currency and the YYY represents the price currency. In all the quotes the base currency is one unit. For example, the quote USD/JPY = 119.50, will mean that 1 USD is equal to 1119.50 JPY. This is of course the simplest form presenting the Forex quote and that will give the information to a certain extent that is the price of one currency in respect of the base currency.

The more complex and widely used method of Forex quoting is the way of presenting the Forex quote with the bid and ask price. This is the most common form of Forex quoting and gives more comprehensive information about the currency prices. In fact in real time trading this method is the most preferred way of presenting the Forex quote. In this method the quote presents the bid price and the ask price of the currency price. The bid price is the price that you are ready to sell the currency and the ask price is the price that you are ready to pay for buying the currency. In this quote as well the base currency is presented first and then the price currency and then the bid price and the ask price. The base currency is considered one unit and the price of the other currency is presented in respect to the base currency. From this quote the spread can be calculated. The spread is the difference between the bid price and the ask price. Another data that can be derived from this quote is the pip. It is the last decimal value that is considered the pip for that currency pair.

For example the quote EUR/USD 1.2385/1.2390 presents that the EUR is the base currency and the bid price is 1.2385 and the ask price is 1.2390. The spread is 1.2390 – 1.2385 = 0.0005 and the pip value would be 0.0001.

 

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