How to Read a Forex Quote

Currency Pairs

A forex quote always consist of two currencies. A base currency and a quote currency. The second currency is always the base currency. So for example, if the quote for EUR/USD is 1.36, the USD is the base currency, this quote says that the Euro is worth 1.36 US Dollars.

Bid Price

There are two parts to a forex quote. A bid price and and asking price. The bid price is the price that you will receive if you place an order to go long on a currency pair.

Ask Price

Forex quotes include a bid price and an ask price. The ask price is the price that your order will be filled at if you sell or go short on a currency pair. In the quote above, the asking price for the EUR/USD is 1.3640, this is the price your order will be filled at if you decide to go short. This is also the price your order will be closed at if you are closing a long that you had open.

What is the spread?

The difference between the bid and ask price is called the spread. The spread is the way forex brokers make their commission on your trades. If you place a long order you will receive the bidding price. When you close that long order, you will receive the asking price. The forex broker will collect the difference. If you opened and immediately closed an order, without any movement in price, you would have paid the spread to the broker.