One of the trickiest things for most traders in forex trading currency market is how to read forex quotes. What on the earth does USD/CAD 116.09/13 mean? Well this article will help you in reading forex quotes, so as to be a well informed trader and trader with confidence. Read on.
As you must be aware, every forex transaction involves two currencies which are bought and sold simultaneously. These currencies make a currency pair. Without reading forex price quote properly, it would be impossible for you to make Forex orders and therefore is very essential for any trader. Go through the following article for reading and understanding forex quotes the right way.
Let us understand how to read forex quote with the help of an example:
Yen and US Dollar quote:
JPY/USD – 1.2462 / 1.2458 or 1.2462 / 58
Base Currency – The currency which appears to the left of the slash, which in this example is the JPY.
Quote Currency - The currency to the right of the slash, which is USD in this example.
As we can see the forex quote consists of two numbers. The firste one to the left of the slash is the bid price, which is the trader's selling price. It is 1.2462.
The second number represents the entire ask price and contains only the last two digits. In the example, this ask price is 1.2458, which is the price that the trader will buy the Forex currency in.
Dual Price Quotes
Therefore we can see that a forex quote is dual quote and always a two-sided, having a ‘bid’ and ‘offer’. The ‘bid’ is the price at which the trader can sell the base currency while the ‘offer’ is the price at which he can buy the base currency.
As is clear form the above example to understand forex quotes, there is a small difference between the bid and the ask price. This small difference between the buying and the selling price is known as the spread. The bank or financial institutions make the price profits from the spread. Therefore we can infer that the spread plays a big role in the real transaction cost of the trade.
As a conclusion, we can see that reading forex quote is quite simple and easy. But reading forex quotes correctly is perhaps the most basic of forex trading currency market.