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Understanding Forex Quotes
Before conducting any forex trade online, it is essential for new traders to become familiar with the forex quotes and how to read them. Reading the quotes can at first seem confusing to new investors, but it is relatively simple once a few key aspects are learned. There are two things that must always be remembered when looking at quotes. The first is that the first currency that is listed will always be the base currency and the value of this base currency is always 1. In the forex market, the US Dollar will often be the centerpiece and it is normally considered the base currency.
When the US Dollar is being used as the base unit and the currency quote increases, it means that the dollar has gained value and the other currency in the pair has weakened. There are three exceptions to this rule, including the British Pound, the Euro and the Australian Dollar. In these cases, traders might see GBP/USD 1.43, which would mean that a British pound would equal 1.43 US Dollars.
Where the US Dollar is not the base rate, a rising quote will mean that the dollar is weakening and that the first base currency is increasing in value. No matter what base currency is being used, if the quote goes higher, that base currency will be increasing. Lowering quotes will mean the opposite, that the base currency is weakening.
In currency pairs where there is no US Dollar involved, this is referred o a cross currencies. The premise will remain the same. For example, if the quote is EUR/JPY 126.2, this means that one Euro will be equal to 126.2 Japanese Yen. When trading forex, traders will often see a two sided quote. This will consist of a bid and an offer or ask price. The bid will be the price at which the base currency can be sold and the ask is the price in which the base currency can be bought.
With just a little time and practice, any new trader can easily understand quotes and will be able to start on a successful trading encounter that can result in amazing returns on small investments. While forex trading may seem confusing at first, having this bit f knowledge will get traders off to a great start.
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