Learning to read forex quotes can be a challenge. They present different information than the standard common stock quotes with which most folks are familiar. Should you determine, after spending plenty of time building a forex trading strategy, that you are ready to enter the forex trading market, then you need to make sure that you know how to properly read the foreign exchange trading quotes.The first part of the quote lets the forex trader know which currency is involved. The nation listed first is referred to as the base currency. This means the trader currently holds that currency and he is using it to buy the quote currency, sometimes called the trade currency. For example, a quote that reads USD/JPY means that the forex trader currently holds United States Dollars and wants to trade them for Japanese Yen. Forex quotes always begin this way, with the two currencies involved forming what’s called the cross.
The second part of forex quotes that you need to look at is the pricing portion of the quote. To continue the example from above, if the quote read USD/JPY=117.57, then the trader knows that for every 1 US dollar he trades, he will get 117.57 Japanese Yen in return. While that may seem really simple, there are a few more details of these quotes that the forex trader needs to take note of before making the foreign exchange trade.
Following the initial line of the quote, which contains the two currencies that form the cross and the exchange rate, is another line of information. This is probably more familiar to common stock traders. Bid prices and ask prices, which make up an integral part of forex quotes, function in trading forex much the same way. The bid price is the price at which you can sell the currency. In other words, that is the price that people are willing to pay for it. The buy price is what you will have to pay if you want to buy the currency. There is usually a difference between these two numbers, but it is seldom substantial.
Most of the examples of forex quotes that you will see as you visit different forex trading platforms across the internet will involve some mixture of the Canadian Dollar, US Dollar, Australian Dollar, Euro, Japanese Yen, and Swiss Franc. The reason for this apparent dominance is that nearly 85% of all real forex quotes involve the currencies of these six nations. These are without question the most stable economies in the world market and are least susceptible to recession and market crashes. This knowledge gives forex traders the confidence to buy and sell national currencies without reservation.
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