How Do You Interpret a Base Currency Exchange Rate Quotes

forex is the buying of one 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 Exchange Rate. In order to trade Forex, a trader must learn how to read and study a FX quote - Base Currency Exchange Rate. A quote is marked & labeled in terms of decimals example illustration, EURUSD: 1.2345 - that is Base Currency Exchange Rate

A quote represents the exchange rate between 2 currencies; Base Currency Exchange Rate referred to as currency pairs. Currencies in the market are traded in the form of Base Currency Exchange Rate pairs, for example 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 Exchange Rate

EURUSD is one of the major currency pair in FX, 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 in relation to the second currency.

If EURUSD = 1.4500

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

Therefore it means 1 Euro = 1.4500 America dollars

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

What is a FX Currency Quote? - Example illustration of Currency Quote - Base Currency Exchange Rate Quotes

Market Watch Window on MT4 - Base Currency Exchange Rate

The above are examples of EURUSD and GBPUSD pairs.

The Base Currency Exchange Rate Quotes are shown as above, there's 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 online brokers make profit.

Where to Get and Find Quotes from MetaTrader 4

To get the Base Currency Exchange Rate quotes display window on the MT4 platform software, follow these guidelines, Click 'View' Menu as shown below, then click 'Market Watch' window.

Where to Get Forex Currency Quotes in the MT4 Software - How Do You Read a Base Currency Exchange Rate Quotes?

Base Currency Exchange Rate From Market Watch

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

How Do I Read Base Currency Exchange Rate Quotes? - How to Interpret/Analyze Base Currency Exchange Rate Quotes in Trading

Listing of Currency Quotes Displayed on MT4 Platform - Base Currency Exchange Rate

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

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

If you trade with a online broker using 5 points (all brokers now use 5 decimal point format), then 1 fractional pip which is the fifth decimal point, will be equivalent to $1 per 1 standard contract. However, this is just the Fraction of a pip & not the original and initial Pip. To Make up one Point you will 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 and shown before 2010 - 4 decimal points format

If EUR USD 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 a Base Currency Exchange Rate Quotes

4 Points Decimal Format in the MT4 Software - Base Currency Exchange Rate

Example: for 5 decimal Points Quote - Base Currency Exchange Rate

If EURUSD moves from 1.45000 to 1.45001 then this move is equal to:

1.45001-1.45000 = 0.00001 (1/10 pipette)

The Value of = 0.00001 USD

1 contract and lot = $100,000 dollars

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

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

Examples: 5 decimal Points Forex Currency Quote - How Do I Read a Base Currency Exchange Rate Quotes?

5 Decimal Points Format in MT4 Platform - Base Currency Exchange Rate

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 Exchange Rate Quotes Moves with Charts

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

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

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