### 10 How to Read a Forex Quote ###

Currencies are always quoted in pairs, such as EUR/USD, USD/JPY ect. The reason they are quoted in pairs is that, in every foreign exchange transaction, you are simultaneously buying one currency and selling another. or actually you bet that one currency will gain or lose value against another

Example,

Here is an example of a foreign exchange rate European Euro versus U.S. dollar:


every currency that is on the left is called based currency and is always Equals to one
Here EUR IS the base currency, and USD in quote currency as is on the right side
When buying, the exchange rate tells you how much you have to pay in units of the quote currency to buy ONE unit of the base currency. In the example above, you have to pay 1.1116 U.S. dollars to buy 1 Euro

 How it looks on MT4

Buy means you bet that the Base currency will go up (gain value) against the quote currency. and would be charged you 1.1116 to place the bet for you via their trading software
  • You would buy the pair if you believe the base currency will appreciate (gain value) relative to the quote currency.
  • You would sell the pair if you think the base currency will depreciate (lose value) relative to the quote currency.

The Bid, Ask and Spread

All forex quotes are quoted with two prices: the bid and ask.
In general, the bid is lower than the ask price.
The bid is the price at which your broker is willing to buy the base currency in exchange for the quote currency.
This means the bid is the best available price at which you (the trader) will sell to the market.
If you want to sell something, the broker will buy it from you at the bid price.
The ask is the price at which your broker will sell the base currency in exchange for the quote currency.
This means the ask price is the best available price at which you will buy from the market.
Another word for ask is the offer price.
If you want to buy something, the broker will sell (or offer) it to you at the ask price.
The difference between the bid and the ask price is known as the SPREAD.
On the EUR/USD quote above, the bid price is 1.34568 and the ask price is 1.34588. Look at how this broker makes it so easy for you to trade away your money.
  • If you want to sell EUR, you click “Sell” and you will sell euros at 1.34568.
  • If you want to buy EUR, you click “Buy” and you will buy euros at 1.34588.
Here’s an illustration that puts together everything we’ve covered in this lesson: