A forex quote is the price of one currency expressed in another currency. Read the pair from left to right. In EUR/USD = 1.0850 / 1.0852, EUR is the base currency, USD is the quote currency, and the two prices are the bid and ask.
This quote means:
- One euro is worth approximately 1.0850 to 1.0852 U.S. dollars.
- You can sell euros at 1.0850, the bid price.
- You can buy euros at 1.0852, the ask price.
- The difference is 0.0002, or 2 pips.
Forex Quote Terms at a Glance
| Term | Meaning | Example |
|---|---|---|
| Currency pair | Two currencies being exchanged | EUR/USD |
| Base currency | The first currency in the pair | EUR |
| Quote currency | The second currency in the pair | USD |
| Bid price | The price at which you can sell the base currency | 1.0850 |
| Ask price | The price at which you can buy the base currency | 1.0852 |
| Spread | The difference between the bid and ask | 0.0002, or 2 pips |
| Pip | A standard unit of price movement | 0.0001 for most major pairs |
What Does a Currency Pair Mean?
A currency pair shows the value of one currency measured in another currency.
In EUR/USD, EUR is the base currency and USD is the quote currency. A quote of 1.0850 means that one euro costs 1.0850 U.S. dollars. The first currency is the one you buy or sell. The second currency is used to pay for it.
The same structure applies to other pairs:
- GBP/USD = 1.2700 means one British pound equals 1.2700 U.S. dollars.
- USD/JPY = 150.20 means one U.S. dollar equals 150.20 Japanese yen.
- AUD/CAD = 0.8950 means one Australian dollar equals 0.8950 Canadian dollars.
Base Currency Versus Quote Currency
The base currency is always listed first. The quote currency is always listed second.
| Pair | Base currency | Quote currency | Meaning |
|---|---|---|---|
| EUR/USD | Euro | U.S. dollar | USD per EUR |
| GBP/JPY | British pound | Japanese yen | JPY per GBP |
| USD/CAD | U.S. dollar | Canadian dollar | CAD per USD |
A simple way to remember the structure is:
The quote tells you how many units of the second currency are needed to buy one unit of the first currency.
How Do Bid and Ask Prices Work?
The bid is the price at which you can sell the base currency. The ask is the price at which you can buy it.
For example:
EUR/USD = 1.0850 / 1.0852
| Price | What it means for EUR/USD | Your action |
|---|---|---|
| Bid: 1.0850 | The broker buys euros from you for 1.0850 USD | Sell EUR/USD |
| Ask: 1.0852 | The broker sells euros to you for 1.0852 USD | Buy EUR/USD |
The bid appears first and the ask appears second.
Why Is the Buy Price Higher Than the Sell Price?
The ask is normally higher than the bid. The difference is the spread.
Using the EUR/USD quote:
Ask - Bid = Spread
1.0852 - 1.0850 = 0.0002
For EUR/USD, one pip is typically 0.0001:
0.0002 ÷ 0.0001 = 2 pips
A trade usually starts with an unrealized loss equal to the spread. The market must move far enough in your favor to cover that cost before the position becomes profitable.
How Do You Read a Forex Price Movement?
For most major currency pairs, one pip is the fourth decimal place.
Example:
EUR/USD moves from 1.0850 to 1.0865
The calculation is:
1.0865 - 1.0850 = 0.0015
0.0015 ÷ 0.0001 = 15 pips
EUR/USD has risen by 15 pips.
A rise generally benefits someone who bought EUR/USD. It generally works against someone who sold the pair.
Japanese Yen Pairs Use a Different Pip Position
For pairs such as USD/JPY, one pip is usually the second decimal place.
Example:
USD/JPY moves from 150.20 to 150.70
The move is:
150.70 - 150.20 = 0.50
0.50 ÷ 0.01 = 50 pips
USD/JPY has risen by 50 pips.
Most non yen pairs use four decimal places for a pip. Yen pairs generally use two decimal places.
What Is a Pipette?
A pipette is one tenth of a pip. Many trading platforms display pipettes as an extra decimal place.
For example:
EUR/USD = 1.08501 / 1.08523
For most pairs:
- 1 pip = 0.0001
- 1 pipette = 0.00001
For yen pairs:
- 1 pip = 0.01
- 1 pipette = 0.001
A quote such as 1.08501 gives you more price precision than a four decimal quote, but the reading method stays the same.
How Do You Know Whether to Buy or Sell a Forex Pair?
Buying or selling a currency pair expresses a view on the base currency compared with the quote currency.
Buying a Currency Pair
When you buy EUR/USD, you are:
- Buying euros.
- Selling U.S. dollars.
- Expecting the euro to rise against the U.S. dollar.
If EUR/USD rises from 1.0850 to 1.0950, the euro has strengthened relative to the dollar.
Selling a Currency Pair
When you sell EUR/USD, you are:
- Selling euros.
- Buying U.S. dollars.
- Expecting the euro to fall against the U.S. dollar.
If EUR/USD falls from 1.0850 to 1.0750, the short position may profit before trading costs.
The trading action applies to the base currency, which is the first currency in the pair.
Worked Example: Reading an EUR/USD Quote
Assume the quote is:
EUR/USD = 1.1050 / 1.1053
This tells you:
- You can sell one euro for 1.1050 USD.
- You can buy one euro for 1.1053 USD.
- The spread is 0.0003, or 3 pips.
- A buy trade must rise by more than 3 pips to cover the initial spread, excluding commissions and other charges.
If you buy 10,000 EUR at 1.1053 and later sell at 1.1073:
Price movement = 1.1073 - 1.1053
Price movement = 0.0020, or 20 pips
For a 10,000 euro position in EUR/USD, each pip is approximately $1. A 20 pip move therefore represents approximately $20 before trading costs.
Worked Example: Reading a USD/JPY Quote
Assume the quote is:
USD/JPY = 150.20 / 150.23
This means:
- You can sell one U.S. dollar for 150.20 yen.
- You can buy one U.S. dollar for 150.23 yen.
- The spread is 0.03 yen.
- One pip in USD/JPY is 0.01 yen, so the spread equals 3 pips.
If USD/JPY rises, one U.S. dollar buys more yen. If USD/JPY falls, one U.S. dollar buys fewer yen.
How Do You Calculate the Spread?
Use this formula:
Spread = Ask price - Bid price
Example:
EUR/USD = 1.2500 / 1.2504
Spread = 1.2504 - 1.2500
Spread = 0.0004, or 4 pips
The spread can change based on the currency pair, market conditions, trading session and broker. It often widens when liquidity is lower or prices are moving quickly.
The spread is only one possible trading cost. Depending on the account and instrument, you may also pay commissions, overnight financing charges or conversion costs. Slippage can affect the execution price as well.
What Does a Rising or Falling Quote Mean?
A rising quote means that the base currency is gaining value relative to the quote currency, or that the quote currency is losing value relative to the base currency.
| Price movement | Meaning |
|---|---|
| EUR/USD rises | The euro strengthens against the U.S. dollar, or the dollar weakens against the euro |
| EUR/USD falls | The euro weakens against the U.S. dollar, or the dollar strengthens against the euro |
| USD/JPY rises | The U.S. dollar strengthens against the yen |
| USD/JPY falls | The U.S. dollar weakens against the yen |
The order of the currencies matters. EUR/USD and USD/EUR would describe the same currencies in opposite directions, although retail forex platforms generally use established market conventions rather than offering both versions.
What Does a Forex Quote Not Tell You?
A price quote does not show the full risk or cost of a trade. Before placing an order, check:
- Whether the displayed prices are bid and ask prices.
- The size of the spread.
- Any commission charged by the broker.
- The required margin.
- Overnight financing or swap charges.
- The position size and pip value.
- Whether the quote is delayed or live.
- How the broker handles slippage during fast markets.
Leverage lets you control a position larger than the cash deposited in the account. It can increase potential gains, but it also increases potential losses. In some retail forex arrangements, losses can exceed the initial margin.
A Simple Method for Reading Any Forex Quote
Use these five steps:
Identify the pair. The first currency is the base currency. The second is the quote currency.
Translate the price. Ask how many units of the quote currency buy one unit of the base currency.
Identify the bid and ask. You sell at the bid and buy at the ask.
Calculate the spread. Subtract the bid from the ask, then convert the difference into pips.
Check the pip size. Use the fourth decimal place for most pairs and the second decimal place for most yen pairs.
Once you can identify the base currency, quote currency, bid, ask, spread and pip, you can read most standard forex quotes.