Exchange market trading is impossible without an understanding of its quotes. Сurrencies’ values are expressed via special codes separated with a slash.
Meaning and Logic of Forex Quotes
A trader who deals with foreign currency ought to understand the relevant market indicators. This knowledge forms the basis of foreign exchange. Quotes and spreads are the language of this business, and they must be understood well. Here are the main finance indicators to learn.
What Quote Names Mean
Even those who have never bought stocks know that USD stands for the US dollars. Pairs of symbolic representations make a quote name. Also known as ISO codes, they are separated with a slash. Normally, the first two letters identify the country, while the third one denotes the currency – e.g., Great Britain Pound (GBP). The Swiss franc is a notable exception ̵
Whether you access the Forex trading market through Alpari or another broker, you will see relative values – i.e., currencies are quoted against one another. In the EUR/USD pair, the value of the EU currency is expressed in American dollars. The first currency is the “base currency”, while the other one may be called “counter currency”, “term currency” or “quote currency”. The case when USD functions as the quote currency is the most common. There are just two possible reverse combinations: USD/JPY and USD/CHF.
Another component of Forex trading for beginners helps to understand when a favorable time for trading has come. For example, consider the currency price of 1.1233/1.1234 for EUR/USD. Both figures show the value of the Euro (the base currency) calculated through that of the US dollar (the quote currency).
The first number (1.1233), termed the “bid price”, is always smaller, regardless of the pair. It shows how many US dollars a trader who sells one Euro will get. The number that goes after it (1.1234) is considered as the “asked price”. It shows how many US dollars you need to spend to purchase a single euro. In conclusion, the quote must be understood as: one euro is worth 1.1233 US dollars in case of selling, or 1.1234 in case of buying.
The difference between the two indicators forms the so-called “spread”. It is measured in ticks, points, or pips (the fourth digit after the dot). In the 1.1233/1.1234 example, it is 0.0001, which is equivalent to a single pip.
These are the basics. To find out more, dive into a breathtaking world of Forex trading.