What Are Forex Quotes and How to Read Them?

Forex Quotes are given in order to assess the number of units in term currency or price currency which can be bought as base currency or in terms of 1 unit currency. Before trading currencies an investor has to have a deeper understanding about the basic terminology of the forex market, including how to understand the forex quotes. In a typical and common foreign exchange transaction an investor is simultaneously buying one currency and selling another. These two currencies are what comprise what we call a currency pair. In order to understand it better, you should always remember two important things. The first currency listed is the base currency and the value of the base currency is always one (1).

Taken as the center of the forex market, the US dollar is more often than not considered the base currency for quotes. The quote would only mean what a US dollar is worth compared to that other foreign currency. When USD is the base currency and the quote goes up, that means USD gaining strength in value and the other currency value is declining. Increasing quotes mean a US dollar can now buy more of the other currency than before.

Example: USD / JPY = 110.90

The currency on the left side before the slash is what we call the base currency and the currency on the right side is called the quote currency or counter currency in other layman term. From the example above, it means that in order for you to buy 1 US dollar you have to pay 110.90 yen to buy one. On the contrary, if you are selling 1 US Dollar, you will receive 110.90 Japanese Yen in return as a payment. Meaning buying a certain currency, the exchange rate indicates how much you have to pay in units of the quoted currency to purchase one unit of the base currency. This also goes to selling a certain currency. The foreign currency indicates how much units of the currency quote you have to sell for one unit of the base currency.

When it comes to foreign exchange, a forex quote includes a bid price and an ask price. The bid price is used when selling a currency pair is going short and reflects how much of the quoted currency will be obtained when selling one unit of the base currency, or how much the market will pay for the quoted currency in relation to the base currency.

As with common forex trading quotes in the financial markets, when you are transacting business a currency pair there is always a bid price or what we may call a buying price and an ask price or what we may call a selling price. When buying a currency pair goes longer, the ask price pass on to the amount of quoted currency that has to be given in order to purchase one unit of the base currency, or how much the market will sell one unit of the base currency in return for the quoted currency. Again, these are all in relation to the base currency.