How to Interpret/Analyze a Base Currency Quote
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 Quote. In order to trade Forex, a trader must learn how to read a quote - Base Currency Quote. A quote is marked & tagged in terms of decimals illustration, EURUSD: 1.2345 - that is Base Currency Quote
A quote represents the exchange rate between 2 currencies; Base Currency Quote referred to as currency pairs. Currencies in the market are traded in the form of Base Currency Quote pairs, for example EURUSD, GBPUSD, USDCHF and USDJPY. The first one is known as the Base currency while the second is referred to as the Quote currency.
Explanation of EURUSD - Base Currency Quote
EURUSD is one of the major forex 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 equal 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 the ratio of 1 EUR:USD = 1 : 1.4500
Therefore it means 1 Euro = 1.4500 America dollars
Base Currency Quote - Explanation of exchange rates on MT4 Software Platform
Market Watch Window in MT4 - Base Currency Quote
The above are examples of EURUSD and GBPUSD pairs.
The Base Currency Quote 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 two 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 Quotes from MT4
To get the Base Currency Quote quotes display window on the MetaTrader 4 software, follow these guidelines, Click "View" Menu just as is shown below, then click "MarketWatch" window.
Base Currency Quote From Market Watch
The Market-Watch window will display all the Forex quotes of the various currency pairs such as illustrated and shown below.
The Listing of Currency Quotes Displayed on the MT4 - Base Currency Quote
5 decimal Fractions Quote - Fraction of a Pip Quoting of Base Currency Quote
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 & not the 5th decimal as the pip value.
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 original and 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 FX 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
4 Points Decimal Format in MT4 - Base Currency Quote
Example: for 5 decimal Points Quote - Base Currency Quote
If EURUSD moves from 1.45000 to 1.45001 then this movement is equal to:
1.45001-1.45000 = 0.00001 (1/10 pipette)
The Value of = 0.00001 USD
1 contract = $100,000
The Value of 1/10 pipette for 1 contract = 100,000* 0.00001= $1
1/10 pipette = $1, for 5 Decimal Points Format
5 Decimal Points Format on the MT4 - Base Currency Quote
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 is a fraction of a pip.
Analyzing Base Currency Quote 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 Chart is plotted, traders can then use these trade charts to analyze and interpret and interpret the price moves, for example the price might show a downwards move or an upward move. These moves may be referred to as trends & the trend might be upward or downward.
Therefore as a beginner day trader all you need to know is that the Base Currency Quote moves will be analyzed from these charts.
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