A Simple Forex Quote

When trading a pair of currencies the trade would be donated using the codes for each currency so that a trade involving both the US dollar and the Pound Sterling might be shown as USD/GBP. Alternatively, the trade could also be shown as GBP/USD but the two are not the same.

The first currency shown in the pairing is known as the 'base' currency and the second as the 'counter' or 'quote' currency. In any quote the base currency is always denoted as a single currency unit and so a quote for USD/GBP would be a quote in Pounds Sterling for 1 US dollar. Similarly a quote for GBP/USD would be a quote in US dollars for 1 Pound Sterling.

In its simplest form a quote might look like this:

USD/GBP = 0.5436

In this case a trader would be prepared to pay 54.36 British Pence (0.5436 Pounds Sterling) to buy 1 US dollar.

It would however be unusual to see a quote with just a single figure and the quote would normally appear as:

USD/GBP = 0.5436/0.5441

In this case the first figure denoted the 'bid' or 'ask' figure, in other words, the price the dealer is prepared to pay to buy the currency. As before, the dealer will pay 54.36 British Pence to buy 1 US dollar. The second figure is the 'offer' figure and denotes the price at which the trader is prepared to sell the currency to you. So, if you wish to buy 1 US dollar then the dealer will sell it to you for 54.41 British Pence.

Confused? Don't worry it becomes second nature with practice.

Unlike many forms of security trading there are very few 'hidden' costs associated with Forex trading and the difference in the two quoted prices (referred to as the bid/offer spread, or simply the spread) is where the dealer makes his money. In this case he will buy US dollars at 0.5436 Pounds Sterling and sell them on at 0.5441 Pounds Sterling taking the 0.0005 Pounds Sterling as his profit.

Although many dealers will provide a full quote as shown above, some will abbreviate this quote to just the last two figures so that the quote will appear as 36/41. There is no set format in providing quotes and each dealer will decide how he wishes to provide quotes.

Recommended books from

In Serena's Web
by Hooper, Kay
Amazon Price:
Customer Review: This book is one of her early releases through the now defunct Loveswept Romance line. Her ability to take the "formula" of their line and add humor and quick-pacing is what lifted her out into the mainstream of contemporary romance / mystery. But as with Nora Roberts' early stuff, don't expect the sophistication of her new material. Just enjoy i...
 

How to Make a Living Trading Foreign Exchange: A Guaranteed Income for Life (...
by Courtney Smith
Amazon Price: $44.10
Customer Review: I've read quite a few books since I've decided to decipher the egnima of Forex. This book is well written and covers some very interesting topics. The stratagies it teaches and some of the perspectives it offer are some of the most useful and luid I have come across.
A definate on your reading list!!
 

AbleTrend: Identifying and Analyzing Market Trends for Trading Success (Wiley...
by John Wang, Grace Wang
Amazon Price: $37.80
Customer Review: The book appears to tie in with the system the author sells for approximately $5000 plus modules for an additional cost per month. I was a fool and bought the system with the understanding it was complete and self contained at the lump sum price. Then after about a year of service, I got the module cost dropped on me. Sadly, the system didn't w...
 

Forex: GBP/JPY continue 2-day slide, at 135.40 - NASDAQ
29 Jul 2010 at 7:37pm

Forex: GBP/JPY continue 2-day slide, at 135.40
NASDAQ
With choppy trading, the pair currently quotes at 135.42 where it posts a 0.77% decline since open. After a slew of critical economic fundamental releases ...
Forex: CAD/JPY trades at 6-day low, under 83.80NASDAQ

all 5 news articles »
 
Forex: AUD/USD consolidates above 0.9000 - NASDAQ
29 Jul 2010 at 5:46pm

Forex: AUD/USD consolidates above 0.9000
NASDAQ
Ahead of the Asian opening on Friday, the AUD/USD quotes currently at 0.9009 where it remains a solid 0.79% higher on the day. With a slight tendency to the ...

and more »
 
Forex: AUD/JPY recovers above 78.10 - NASDAQ
28 Jul 2010 at 11:04pm

Forex: AUD/JPY recovers above 78.10
NASDAQ
Currently the AUD/JPY quotes at 78.16 where it continues to show bullish momentum. Immediate resistance to the upside is placed at 78.26 and later 78.46. ...

and more »