How to read a forex quote for beginners
By Forexuro Desk. Education, not financial advice. All guides
Every forex trade starts with a quote such as EUR/USD 1.1000. Reading it correctly tells you which currency you are buying, which you are selling, what the trade costs and how a move in the price affects you. This guide explains base and quote currencies, bid and ask prices, the spread and the main groups of currency pairs.
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Base and quote currency
A currency pair shows the value of one currency in terms of another. The first currency is the base currency and the second is the quote currency. The price tells you how many units of the quote currency one unit of the base currency costs.
EUR/USD at 1.1000 means one euro costs 1.10 US dollars. USD/JPY at 150.00 means one US dollar costs 150 Japanese yen. If EUR/USD rises to 1.1100, the euro has strengthened against the dollar, the dollar has weakened against the euro, or both.
The same rate can be written the other way round. USD/EUR is simply 1 divided by EUR/USD, so a EUR/USD price of 1.1000 equals a USD/EUR price of about 0.9091. Markets follow fixed conventions for which currency comes first, so you will almost always see EUR/USD rather than USD/EUR.
Buying and selling a pair
When you buy a pair you buy the base currency and sell the quote currency at the same time. When you sell a pair you do the reverse.
| Action on EUR/USD | You are | You gain if |
|---|---|---|
| Buy (go long) | Buying euros, selling dollars | The price rises |
| Sell (go short) | Selling euros, buying dollars | The price falls |
Because every trade involves two currencies, news about either one can move the pair. A strong US jobs report can push EUR/USD lower even if nothing changed in Europe.
Bid, ask and the spread
Platforms show two prices for every pair. The bid is the price at which you can sell. The ask, sometimes called the offer, is the price at which you can buy. The ask is always a little higher than the bid, and the gap between them is the spread.
Worked example: EUR/USD is quoted 1.10000 bid and 1.10008 ask. The spread is 0.00008, or 0.8 pips. If you buy at 1.10008 and immediately sell at 1.10000, you lose the spread. On one standard lot of 100,000 euros, 0.8 pips is about 8 dollars.
Charts on most platforms are drawn from the bid price. That is why a buy order can be filled slightly above the line you see on the chart, and why a sell stop can be triggered when the chart seems to stay just above your level. Spreads usually widen when the market is quiet, such as around the daily rollover, and around major data releases. Our article on spreads and swaps covers the costs in more detail.
Majors, crosses and exotics
Currency pairs are usually grouped by how actively they trade.
| Group | What it means | Examples |
|---|---|---|
| Majors | The US dollar paired with another major currency | EUR/USD, GBP/USD, USD/JPY, USD/CHF, AUD/USD, USD/CAD, NZD/USD |
| Crosses | Two major currencies without the US dollar | EUR/GBP, EUR/JPY, GBP/JPY |
| Exotics | A major currency paired with a currency from a smaller or emerging economy | USD/TRY, USD/ZAR, USD/MXN |
Majors normally have the tightest spreads and the deepest liquidity. Exotics can have much wider spreads and sharper moves, which raises the cost and the risk of trading them. Gold is often quoted the same way, as XAU/USD, where XAU is one troy ounce of gold; our gold basics guide explains how it differs from currency pairs.
Decimal places and pips
Most pairs are quoted to four decimals, with a fifth decimal for fractions of a pip. Yen pairs are quoted to two decimals, with a third for fractions. A move in the fourth decimal on EUR/USD, or the second on USD/JPY, is one pip. Our guide to pips and the pip value calculator show what each move is worth in money.
Reading a quote step by step
- Identify the base currency, the first one, and the quote currency, the second one.
- Read the price as the number of quote currency units per one unit of the base.
- Check the bid and ask, and work out the spread in pips.
- Decide what a rise or fall in the price would mean for a buy or a sell.
Quote checklist
- I know which currency I am buying and which I am selling.
- I know that I buy at the ask and sell at the bid.
- I check the spread before I trade, especially around news.
- I remember that charts are usually drawn from the bid.
- I know that exotic pairs cost more to trade.
Frequently asked questions
What does EUR/USD 1.1000 mean?
It means one euro costs 1.10 US dollars. The euro is the base currency and the US dollar is the quote currency.
Why is the buy price higher than the sell price?
You buy at the ask and sell at the bid. The ask is slightly higher, and the difference, the spread, is part of the cost of trading.
What is the difference between a major and a cross?
A major pairs the US dollar with another major currency, such as EUR/USD. A cross pairs two major currencies without the dollar, such as EUR/GBP.
Related reads
Next guide: What is a pip in forex?
Pips, pipettes and pip value on major pairs, yen pairs and gold, with worked examples.
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