How to Read a Forex Currency Quote-How to Read Currency Pairs|Forex Education

 

Currencies are always quoted in pairs, such as GBP/USD or EUR/USD. The reason they are quoted in pairs is because in every foreign exchange transaction, you are simultaneously buying one currency and selling another. Here is an example of a foreign exchange rate for the Great British Pound versus the U.S. dollar:

The first listed currency to the left of the slash ("/") is known as the base currency (in this example, the Great British Pound ), while the second one on the right is called the counter or quote currency (in this example, the U.S. dollar).

When buying, the exchange rate tells you how much you have to pay in units of the quote currency to buy one unit of the base currency. In the example above, you have to pay 1.51258 U.S. dollars to buy 1 British pound.

When selling, the exchange rate tells you how many units of the quote currency you get for selling one unit of the base currency. In the example above, you will receive 1.51258 U.S. dollars when you sell 1 British pound.

The base currency is the "basis" for the buy or the sell. If you buy EUR/USD this simply means that you are buying the base currency and simultaneously selling the quote currency. In Simple talk, "buy EUR, sell USD."

You would buy the currency Pair if you believe the base currency will appreciate (gain value) relative to the quote currency. You would sell the pair if you think the base currency will depreciate (lose value) relative to the quote. 

What is controlling currency in a quote?

The quote currency, commonly known as "counter currency," is the second currency in both a direct and indirect currency pair and is used to determine the value of the base currency. In a direct quote, the quote currency is the foreign currency, while in an indirect quote, the quote currency is the domestic currency.

Also Read: how to read bid and ask in Forex

May 16, 2021 Tags : Forex Basics