Read a Forex Quote

Read a Forex Quote

Total newbies exchange market can be found reading the exchange rate rather frightening (even confusing) at first. Actually, this is the most common initial hurdle. The quote is short, but it packs a great deal of useful information. And although it does not make sense to lick a newcomer, here's a quick, simple explanation of what it means.

Quote Forex is always based on a pair of currencies, where you are simultaneously selling one currency and buying another. And there are two prices, one for selling and buying the other (bid price and ask price). When reading a quote exchange rates, which can usually look like this: USD / JPY 106.52/56

The first currency is called the base currency and the other is the quote currency. The base currency value is always 1 (in this case $ 1). The number in the quote tells you how much of the quote currency (Japanese yen) can be bought with $ 1.

And that number - 106.52/56 - is a shortened version of the two numbers (106.52 and 106.56). The lower number is the bid price and the other is to ask for price. The bid price shows how service will buy the base currency. The asking price shows how much a dealer is willing to sell.

If you saw 106.52/56 when reading a quote exchange rates, that would mean they could sell a $ 106,52 ¥ and get the dollar. On the other hand, if you wanted to buy U.S. dollars, will have to pay 106,56 ¥ for every dollar.

The difference between bid price and ask price offer in exchange is called "spread" and any small 0.01 unit called "pip". In our example, spread to our USD / JPY quote is four pips. Spread the most commonly traded currencies that small. In general, you make the most of your trading in U.S. dollars, Japanese Yen, UK Pounds, euros, Swiss francs and Australian dollars. Also, please note that when the competition really heated up some spread will be as small as one pip.

On the other hand, less difficult to trade currencies, you may encounter a much larger spread. But do not think that a small spread means small profit (or loss). When you're trading hundreds of thousands of units, and even that one pip spread can mean a lot of money.

Let's say you're dealing with just $ 100. Sale of hundred dollars to ¥ 10.652 to buy them for only 10.656 ¥ down to ¥ 4 difference. But most Forex traders will deal with amounts of $ 100,000 (or many multiples). So, now I know when I read a quote exchange rates, even such trivial little four-pip spread is significantly higher (at 4,000 yen, and probably several multiples of that).

And, of course, similar craft can be repeated throughout the day and week. This means that at any time to read the quote currency exchange rate will admit that this little spread is more important than its meager size at first proposed.