How to Read a Currency Quote

Forex trading is the buying of one currency for another. In other words it is the simultaneous buying of one currency and selling of another. In order to trade Forex, a trader must learn how to read a Forex quote. A currency quote is marked in terms of decimals - example forex quote of EUR USD: 1.2345

A currency quote represents the exchange rate between two currencies; referred to as forex currency pairs. Currencies in the market are traded in pairs, for example EUR USD, GBP USD, USD CHF and USD JPY. The first one currency in the currency pair is known as the Base currency while the second currency in the currency pair is known as the Quote currency.

Example of EUR USD Currency Pair - Forex Base Currency and Forex Quote Currency

EUR USD is one of the major currency pair in forex, therefore we shall use it for our example:

EUR USD

• Base Currency - EUR

This is the first currency in the currency pair (EUR). The Base currency is equal to 1 unit of the first currency.

• Quote Currency - USD

This is the second currency in the currency pair (USD). The Quote currency shows the value of the base currency in relation to the second currency.

If EUR USD currency pair quote = 1.4500

It means the ratio of EUR : USD = 1 : 1.4500

Therefore it means 1 Euro = 1.4500 US dollars

Example of exchange rates on MT4 Platform

Market Watch Window in MetaTrader 4 Platform - MT4 Symbols and Currency Quotes

The above are examples forex quotes of EUR USD and GBP USD currency pairs.

The Quotes are shown as above, there is the Bid price, the price at which you buy and there is Ask price, the price at which you sell. The difference between these two Bid - Ask quotes is the spread. Spread is the small markup that the broker puts before selling to you. This forex spread is how brokers make profit.

Where to Get Forex Quotes From MT4 Platform

To get the currency quotes display window on the MT4 platform, follow these instructions, Click 'View' Menu as shown below, then click 'Market Watch' window.

Forex Currency Quotes and MT4 Symbols for Currency Pairs

The Meta Trader 4 Market Watch window will display all the quotes of the various forex currency pairs as shown below.

List of Currency Quotes Displayed in MT4 Platform - MT4 Currency Quotes - Quotes Explained

Pips - Pips

One forex pip is the basic unit used to measure price movement; it is equal to the last decimal point in a Currency Quote (4 Decimal Point Format), forex pip is the smallest change in price movement. The last decimal point should be the 4th decimal point. However, the fifth decimal point that is now implemented by online brokers is known as fraction of a pip or pipette.

5 Decimal Fractions Forex Quotes - Fraction of a Pip

From 2010, Brokers started to implement the fifth decimal forex currency quotes, the fifth decimal point is known as the fractional Pip. Before this all forex quotes were 4 decimal places and that is when the last point was referred to as a pip. Therefore, when forex trading, as a trader always use the fourth decimal point and not the fifth decimal point as the pip value.

If you trade with a broker using 5 points (all brokers now use 5 decimal point currency quote format), then 1 fractional pip which is the 5th decimal place, will be equal to 1 dollar per 1 standard contract. However, this is just the Fraction of a pip and not the original Forex Pip. To Make up one Point (1 Pip) you will have to use 10 points, (it is like rounding off to the fourth decimal point).

Example Currency Quote: For 4 Decimal Points Forex Quotes Format

This is how the quotes were displayed before using - 4 decimal points format

If EUR USD currency pair moves from 1.4500 to 1.4501 then this move is equal to:

1.4501-1.4500 = 0.0001 (1 pip)

Value of = 0.0001 USD

1 contract = $100,000

Value of 1 pip for 1 contract = 100,000* 0.0001= $10

1 pip = $10, for 4 Decimal Points Currency Quote Format

4 Points Decimal Format in MT4 Platform - 4 Decimal Points Currency Quote Format - How to Analyze Currency Quotes

Example Currency Quote: For 5 Decimal Points Forex Quote Format

If EUR USD currency pair moves from 1.45000 to 1.45001 then this move is equal to:

1.45001-1.45000 = 0.00001 (1/10 pipette)

Value of = 0.00001 USD

1 contract = $100,000

Value of 1/10 pipette for 1 contract = 100,000* 0.00001= $1

1/10 pipette (Fraction of a Pip) = $1, for 5 Decimal Points Currency Quote Format

5 Decimal Points Format in MetaTrader 4 Platform - 5 Decimal Points Currency Quote Format - How to Read Currency Quotes

Please Note from the above MT4 platform screenshot how the fifth decimal point is shown in a digit much smaller than the other digits, this is to signify that it is a fraction of a forex pip.

Analyzing Currency Quotes Moves With Charts

These streaming currency quotes in Forex are used to plot and draw charts - these charts are then used to analyze the chart price movements. When a Chart is plotted and drawn, traders can then use these charts to analyze the price movements, for example the price may show a downward price move or an upward price move. These price moves may be referred to as trends and the trend may be upward or downward - based on the direction of the prices - upward trend is when prices generally move upwards - downward trend is when prices generally move downwards.

Therefore as a beginner day trader all you need to know is that the currency quotes moves will be analyzed from these charts.