How Do I Read a Currency Quote
FX trading is the buying of a currency for another. In other words it is the simultaneous buying of one currency and selling of another. In order to trade Forex, one must learn how to read a quote. A currency quote is marked & labeled in terms of decimals - example forex quote of EURUSD: 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, e.g. EURUSD, GBPUSD, USDCHF & USDJPY. The first one currency in the forex currency pair is known as the Base currency while the second currency in the forex currency pair is known as the Quote currency.
Explanation of EURUSD Currency Pair - Forex Base Currency and Quote Currency
EUR USD is one of the major currency pair in forex trading, thenceforth we shall use it for our example:
EURUSD
- Base Currency - EUR
This is the first currency in the forex currency pair (EUR). The Base is equivalent to 1 unit of the first currency(base).
- Quote Currency - USD
This is the second currency in the forex currency pair (USD). The Quote currency illustrates the value of the base currency relative to the second currency.
If EURUSD currency pair quote = 1.4500
It means ratio of One EUR : USD = 1 : 1.4500
Hence it means 1 Euro = 1.4500 USA dollars
Explanation of exchange rates on MT4 Software Platform
Market Watch Window in MetaTrader 4 Platform Software - MT4 Symbols and Currency Quotes
The above are examples quotes of EURUSD and GBPUSD currency pairs.
The Quotes are shown as above, there's 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 mark up that the broker puts before selling to you. This spread is how online brokers earn profit.
Where to Get and Find Forex Quotes from MT4 Software
To get the currency quotes display window on the MetaTrader 4 platform software, follow these steps, Click "View" Menu just as shown/illustrated below, then click "MarketWatch" window.
FX Currency Quotes and MT4 Symbols for Currency Pairs
The MT4 Market-Watch window will display all the quotes of the different forex currency pairs just as illustrated and shown below.
List of Quotes Displayed on MT4 Platform - MT4 Currency Quotes - Forex Trading Quotes Explained
Pips - Pips
One forex pip is the basic unit used to measure forex 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 forex 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 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 the quotes were 4 decimal points and that's 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 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 (1 Pip) you'll have to use 10 points, (it is like rounding off to the 4th decimal point).
Example Currency Quote: for 4 Decimal Points Quotes Format
This is how the quotes were displayed before using - 4 decimal points format
If EURUSD currency pair moves from 1.4500 to 1.4501 then this market movement is equal to:
1.4501-1.4500 = 0.0001 (1 pip)
Value of = 0.0001 USD
1 contract and lot = $100,000 dollars
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 on the MetaTrader 4 Software - 4 Decimal Points Currency Quote Format - How to Analyze/Interpret Currency Quotes
Example Currency Quote: for 5 Decimal Points Quote Format
If EURUSD 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 lot = $100,000 dollars
Value of 1/10 pipette for 1 contract and lot = 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 Software - 5 Decimal Points Currency Quote Format - How to Read and Interpret Currency Quotes
Please Note from the above MetaTrader 4 software screen-shot how the fifth decimal point is displayed & shown in a digit that is smaller than the other digits, this is to illustrate that it is a fraction of a pip.
Analyzing Currency Quotes Moves with Forex Charts
These streaming currency quotes in Forex are used to plot and draw charts - these forex charts are then used to analyze and interpret the chart price moves. When a Chart is plotted and drawn, traders can then use these forex charts to analyze and interpret the price moves, for example the price might show a downward forex price move or an upward forex price move. These forex price moves may be known as trends and the trend may be upward or downward - based on the direction of the prices - upward forex trend is when prices generally move upwards - downward forex 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 forex charts.
More Topics & Courses:
- FX DeMark Range Extension Indices Automated Expert Advisor(EA) EA Setup
- US 100 Indicator MetaTrader 4 Trading Indicators
- Learn Forex Tips for Successful Trading
- What's the Margin Requirement for Trading 1 Lot of S and P ASX200 Index?
- How Do I Place Indicators in Forex Charts on MetaTrader 4 Platform/Software?
- How Can I Calculate Profit in FX Trading for Nano Account?
- Kauffman Efficiency Ratio XAU USD Indicator Technical Analysis
- How Much Does a Forex Trading Cent Lot Cost?
- Forex Account Deposit Bonus Including Lot Rebates and Forex Cash Back
