Forex Quotes Explained

In today’s video, we will discuss how to read Forex quotes. We’ll cover terms like "bid" and "ask," and what they mean for traders.

00:04:12

There are five major currency pairs you need to know as a trader. The major ones are the Euro dollar (EUR), U.S. Dollar (USD), Japanese yen (JPY), British pound (GBP), and the Swiss franc (CHF). This is the baseline that many other currency pairs are going to be based on. We also have the large/non-major currency pairs, which include the New Zealand dollar (NZD), Australian dollar (AUD), and the Canadian dollar (CAD).

You will see all of these pairs listed often in quotes as bid/ask (buy/sell) price levels. For example, if the EUR to USD exchange is trading at a price of 1.23, this means that for every one Euro it will take me 1.23 U.S. dollars to buy a Euro.

You will also see this exchange listed in a bid/ask format. Let’s say that the bid is 1.23 but the ask is 1.2302, so there’s a 2 pip spread between the bid and ask price. As a buyer, I want to put my limit order in so I can buy the EUR at 1.23. However, the trade may not occur if the seller is unwilling to sell the currency for lower than 1.2302. Plus, a trader may choose to place a market order at the bid/ask prices listed because they believe the opportunity is worth taking immediate action.

Meanwhile, the broker will typically charge a slight spread (a commission) between the bid and the ask to place the order. Traders also have the option to place a limit order agreeing to pay a price between the bid and the ask, which in our example would be 1.2301.

Disclaimer: Please read our general disclaimer and risk ...

more
How did you like this article? Let us know so we can better customize your reading experience.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.