Forex quotes show the price of one currency in terms of second currency. The quotes utilize ISO code abbreviations, so the US dollar becomes USD, and the Euro is EUR. The first currency shown is the base, the second is the quote or variable currency. So for EUR/USD, the Euro is the base. Prices are shown from the perspective of the broker. If you’re a trader, you sell at the Bid price and buy at the Ask price. The Ask minus the Bid is called the spread. This is often a matter of “pips,” which is the fourth decimal place on a Forex price.
- Since a trader’s profit or loss is determined by movements in price (the quote), it is essential to develop a sound understanding of how to read currency pairs.
- Forex quotes show two currencies, the base currency, which appears first and the quote or variable currency, which appears last.
- Traders will always be looking to buy forex when the price is low and sell when the price rises; or sell forex in anticipation that the currency will depreciate and buy it back at a lower price.
“Brokers will typically quote two prices for any currency pair and receive the difference (spread) between the two prices, under normal market conditions.”