How Do I Read a Currency Quote
FX trading means buying one currency and selling another at the same time. To trade forex, you must read quotes. Quotes use decimals. For example, the EURUSD quote is 1.2345.
A currency quote shows the value of one currency compared to another, which is known as forex currency pairs. Currencies are traded in the market in pairs, for example EURUSD, GBPUSD, USDCHF and USDJPY. The first currency in the forex currency pair is known as the Base currency and 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 recognized as one of the primary currency pairs in forex trading: we will therefore utilize it for demonstration:
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
The quote currency represents the value of the base currency relative to the second currency in forex trading pairs (e.g., USD).
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
On the MT4 program platform, there is an explanation of exchange rates.
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, 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 shown below.
Listing of Currency Quotes Displayed on the MT4 Platform - Understanding Forex Trading Quotes on MT4
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
Brokers added a fifth decimal to forex quotes starting in 2010. That extra digit is the fractional pip. Quotes used four decimals before, with the last as a full pip. In trading, count pips from the fourth decimal, not the fifth.
Brokers quote with 5 decimal places now. The fifth digit counts as one fractional pip, worth $1 per standard lot. This differs from a full pip though. Ten fractional pips equal one pip, like rounding to the fourth decimal spot.
Example Currency Quote: for 4 Decimal Points Quotes Format
Quotes Used to Show in a 4-Decimal Point Style
If the EURUSD currency pair shifts from 1.4500 to 1.4501, this specific market movement represents a value equivalent to:
1. 4501 minus 1. 4500 equals 0. 0001 (1 pip)
Value of = 0.0001 USD
One standard unit's worth (contract/lot) equals $100,000 USD
Value of 1 pip for 1 contract = 100,000* 0.0001= $10
1 pip = $10, for 4 Decimal Points Currency Quote Format
MetaTrader 4 Software: Four Decimal Points Currency Quote Format, Four Points Decimal Format. How to Analyze and 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
For 1 contract lot valued at 100,000 units, the value per 1/10 pipette (0.00001 move) equates to $1.
One-tenth of a Pip (Fractional Pip) equals $1 when using the 5 Decimal Places format for currency quotations.
Understanding the 5 Decimal Points Format in MetaTrader 4 Software - How to Properly Read and Make Sense of Currency Quotations in the 5 Decimal Format.
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.
So, if you're just starting out as a day trader, know that the price changes will be looked at using these forex charts.
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