Reading Fx Quotes Correctly

As a Fx trader, you need to read Fx quotes online, which are how the currencies are written. As we know, in every Fx transaction, two currencies are simultaneously bought and sold, which are known as the currency pair. Without knowing how to read Fx quotes, you won’t find any option to make Forex orders. Hence it is very essential for any fx trader to know how to read Fx quotes, which is the focus of this page.

Reading fx quotes online correctly is essential to trading but it can be quite confusing for any new trader. But actually, they are quite easy to read and understand. Go through he following guideline for reading and understanding fx quotes correctly.

Fx currencies always appear in online Fx quotes. Let us understand this with the help of an example:

Euro and US Dollar quote:

EUR/USD – 1.2478 / 1.2465 or 1.2478 / 65

Base Currency – The currency appearing to the left of the slash, which in this example is the EUR.

Quote Currency - The currency to the right of the slash, which is the USD in the example.

Bid price

As we can see the online Fx quote contains two numbers, the first, the one to the left of the slash (1.2478 in this example), is the bid price, which is the trader's selling price.

Ask price

The second number, containing only the last two digits, symbolizes the entire ask price, that is, the price that the trader buys the Forex currency in. In the example, this price is 1.2465.

Dual Price Quotes

Hence we can see that a fx quote online is always a two-sided or dual quote with a ‘bid’ and ‘offer’. The ‘bid’ is the price at which you can sell the base currency i.e. buy the second currency. The ‘offer’ is the price at which you can buy the base currency i.e. sell the second currency.

Spreads

As the above example clearly shows a small difference between the bid and the ask price, that is the price you can buy at and the price you can sell at. This difference between the buy price and the sell price is known as the spread. The bank or financial institution set the price profits from the spread. As a result, the spread being a big part of the real transaction cost of the trade, it indicates how much the price must move in favor of the trader before the trader can exit the trade at a profitable level.

So we can see that understanding Fx quotes is quite easy. Reading them is perhaps the most basic of online Fx trading, for every second the value of the Fx quotes keep getting changed.