How Do I Read a Base Currency Counter Currency

forex is the buying of a currency for another. In other words it is the simultaneous buying of one currency and selling of another in the form of a quote that is comprised of Base Currency Counter Currency. In order to trade FX, a trader must learn how to read a quote - Base Currency Counter Currency. A quote is marked & tagged in terms of decimals illustration, EURUSD: 1.2345 - that is Base Currency Counter Currency

A quote represents the exchange rate between 2 currencies; Base Currency Counter Currency referred to as forex pairs. Currencies in the market are traded in the form of Base Currency Counter Currency pairs, e.g. EURUSD, GBPUSD, USDCHF and USDJPY. The first one is referred to as the Base currency while the second is known as the Quote currency.

Explanation of EURUSD - Base Currency Counter Currency

EURUSD is one of the major currency pair in Forex, thenceforth we shall use it for our example:

EURUSD

Base Currency - EUR

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

Quote Currency - USD or Variable Currency

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

If EURUSD = 1.4500

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

Hence it means 1 Euro = 1.4500 US dollars

Base Currency Counter Currency - Example illustration of exchange rates on MetaTrader 4 Platform

Example of a Forex Currency Quote - How to Read and Interpret Forex Base Currency Counter Currency

MarketWatch Panel Window on the MT4 - Base Currency Counter Currency

The above are examples of EURUSD & GBPUSD pairs.

The Base Currency Counter Currency Quotes are shown as above, there is the Bid, the price at which you buy and Ask, the price at which you sell. The difference between these 2 quotes is the spread. Spread is the small mark up that the online broker puts before selling to you. This spread is how brokers earn profit.

Where to Get FX Quotes from MT4

To get the Base Currency Counter Currency quotes display window on the MetaTrader 4 platform software, follow these steps, Click "View" Menu just as is shown/illustrated below, then click "MarketWatch" window.

Where to Get Currency Quotes in MT4 Platform - How Do I Read Forex Base Currency Counter Currency?

Base Currency Counter Currency From Market Watch

The Market-Watch window panel will display all the quotes of the various currency pairs such as illustrated and shown below.

List of Forex Currency Quotes Displayed in MT4 - How to Interpret/Analyze a Base Currency Counter Currency

List of Currency Quotes Displayed on the MT4 - Base Currency Counter Currency

5 decimal Fractions Quote - Fraction of a Pip Quoting of Base Currency Counter Currency

From 2010, Brokers started to implement the fifth decimal quotes, the 5th point is known as the fractional Pip. Before this all quotes were 4 decimal places and that's when the last point was known as a pip. Hence, when trading always use the fourth point and not the fifth decimal as the pip size.

If you trade with a broker using 5 points (all online brokers now use 5 decimal point format), then 1 fractional pip which is the 5th decimal place, will be equivalent to $1 per one standard lot. However, this is just the Fraction of a pip and not the initial Pip. To Make up one Point you'll have to use 10 points, (it is like rounding off to the fourth decimal point).

Example: for 4 Digits Quotes Format

This is how the quotes were displayed & shown before 2010 - 4 decimal point format

If EURUSD moves from 1.4500 to 1.4501 then this market movement is equal to:

1.4501-1.4500 = 0.0001 (1 pip)

The Value of = 0.0001 USD

1 contract = $100,000

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

1 pip = $10, for 4 Decimal Points Format

How to Read and Interpret a Base Currency Counter Currency

4 Points Decimal Format in MT4 - Base Currency Counter Currency

Example: for 5 decimal Points Quote - Base Currency Counter Currency

If EURUSD moves from 1.45000 to 1.45001 then this movement is equivalent to:

1.45001-1.45000 = 0.00001 (1/10 pipette)

Value of = 0.00001 USD

1 contract and lot = $100,000 dollars

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

1/10 pipette = $1, for 5 Decimal Points Format

Examples: 5 decimal Points FX Currency Quote - How Do I Read a Base Currency Counter Currency?

5 Decimal Points Format on the MT4 - Base Currency Counter Currency

Please Note from the above screen-shot how the fifth decimal point is displayed & shown in a digit that is smaller than the other digits, this is to signify that it's a fraction of a pip.

Analyzing Base Currency Counter Currency Quotes Moves with Forex Charts

These streaming quotes in FX are used to plot charts - these trading charts are then used to analyze and interpret the chart price moves. When a Forex Chart is plotted, traders can then use these trade charts to analyze and interpret and interpret the price moves, for example the price may show a downwards move or an upwards move. These moves might and may be known as trends and the market trend may and might be upwards or downward.

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

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