Forex Quotes Explained

Forex Quotes Explained
March 29, 2021 Market Traders Institute

In today’s video, we will discuss how to read Forex quotes. We’ll cover terms like bid and ask and what they mean for traders.

My name is Tyson Clayton, Senior Currency Strategist for Market Traders Institute. I’m a master Forex instructor with over 20 years of experience teaching student traders how to take ultimate control over not just their finances, but their lives.

There are five major currency pairs you need to know as a trader. The major ones are the Euro dollar (EUR), U.S. Dollar (USD), Japanese yen (JPY), British pound (GBP) and the Swiss franc (CHF). This is the baseline that many other currency pairs are going to be based on. We also have the large/non-major currency pairs, which include the New Zealand dollar (NZD), Australian dollar (AUD) and the Canadian dollar (CAD).

You will see all of these pairs listed often in quotes as bid/ask (buy/sell) price levels. For example, if the EUR to USD exchange is trading at a price of 1.23, this means that for every one Euro it will take me 1.23 U.S. dollars to buy a Euro.

You will also see this exchange listed in a bid/ask format. Let’s say that the bid is 1.23 but the ask is 1.2302, so there’s a 2 pip spread between the bid and ask price. As a buyer, I want to put my limit order in so I can buy the EUR at 1.23. However, the trade may not occur if the seller is unwilling to sell the currency for lower than 1.2302. Plus, a trader may choose to place a market order at the bid/ask prices listed because they believe the opportunity is worth taking immediate action.

Meanwhile, the broker will typically charge a slight spread (a commission) between the bid and the ask to place the order. Traders also have the option to place a limit order agreeing to pay a price between the bid and the ask, which in our example would be 1.2301. There are many other different ways to place orders and MTI’s instructors will go over those in our live training sessions.

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