Tips on How to Read Forex Quotes

Tips on How to Read Forex Quotes

Forex quotes will be something that you will consume every day if you want to trade over there. Here is how you read them.

How to read the most basics of quote

Say you encountered something like ‘USD/JPY = 120’ over some Forex website and you wonder what the thing means. This quote and many other quotes resembling this one will be the first thing you should notice when you trade in Forex. This quote simply tells you about the current buying price of a certain currency with another certain currency. In this quote, the currencies in the talk are US Dollar (as the base currency) and Japanese Yen (as the counter currency). This quote simply indicates that you will get 120 Japanese Yen for a dollar. The base currency, no matter if it is USD or IDR or SGD, will always come in a denomination of one.  

There is also two things called direct currency and indirect currency

To put it simply, the quotation above is what we call as a direct quote. It is called just so because the JPY is the domestic currency and the USD is the foreign currency. To turn it into an indirect quote, you just need to swap the place around and you will get your indirect quote. Be mindful that reading indirect quotes can be pretty hard because dollars are more often than not the stronger currency out of the two in comparison. If you insist on using indirect quotations, be prepared to see lots of 0,000… and the kind on the price.

Cross currency is also available.   How to Get Profit from Forex Trading

This one is pretty easy to explain: you just need to omit the USD from any quotes and you will have a cross currency quote. This quote here is used if you want to trade foreign currencies aside from USD directly. You can use it to find the best possible price to exchange your domestic currencies for another foreign currencies that are weaker than US Dollars. This type of quotes are rather odd, though, so do not expect it to have a high trade value on a daily basis. Some people thrives on cross currency, some thinks that this just brings further complications.

Ask and bid on the currency market

Like any other type of markets, there are also ask and bid numbers over Forex. You will see something like this on paper:

USD/CAD = 1.1000/04

Bid = 1.1000

Ask = 1.1004

Reading this is easy. If you want to buy any certain currency, you look at the numbers after ask. According to the ask below, you will be able to buy one US dollar with 1.1004 Canadian Dollars. If you want to sell, you look at the bid price. For a USD sold to the Forex market, you will get 1.1000 Canadian Dollars.


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