Forex Quotes

Forex transactions always involve buying one currency by selling another. Therefore, Forex quotes are always done in currency pairs - the buying currency against the selling currency. Sometimes a currency pair is not explicitly stated, but the Forex quote always involves trading one currency against another.

There are many factors which determine currency prices. Political events, economic health, interest rates, and inflation all play a part in determining the price of a particular currency. Sometimes governments may try to control the price of their own currency, but this can only have a short-term effect. In the long run, market forces determine currency prices, and this is the reason why the Forex market is the most equitable investment opportunity. There is no such thing as Forex insider trading.

Forex Quote Codes

Every world currency has a three letter code which is used in Forex quotes. A Forex quote looks like this:

USD/CAD = 1.1727

USD means US dollars and CAD means Canadian dollars. The first currency of any Forex quote is the base currency and the second currency is the quote currency. In the example given above one US dollar is equal to 1.1727 Canadian dollars. Stated another way, 1.1727 Canadian dollars can buy a one US dollar, or one US dollar can buy 1.1727 Canadian dollars (almost - there is a difference between bid and ask prices - see below).

Here is another Forex quote:

EUR/JPY = 157.08

This tells us that one Euro (EUR) costs 157.08 Japanese yen (JPY).

When a Forex quote rises it means that the base currency is becoming stronger and able to buy more of the quote currency. When a Forex quote falls, it means that the base currency is becoming weaker.

Bid and Ask in Forex Quotes

As noted above, there is a difference between bid and ask prices. The bid price is the price that buyers pay for the base currency, and the ask price is the selling price of the base currency. Forex quotes always indicate the bid price which is lower than the ask price.

It is possible to trade any currency against any other currency, but the Forex concentrates on "The Majors" - GBP/USD, EUR/USD, AUD/USD, USD/JPY, USD/CHF, and USD/CAD. Many brokers will charge an extra fee if you wish to trade currencies other than the majors.

Besides currency pairs, Forex quotes can also be seen in cross currency charts that list many different currencies and their values against each other. Here is an example of a cross currency chart:

In this chart, the base currencies are in the left-hand column, and the quote currencies are in the top row. To find a Forex quote for a particular currency pair, find the base currency in the left-hand column and follow that row to the quote currency.

In the chart above:

EUR/USD = 1.2957 and

USD/CHF = 1.2486

Currency Codes of the Majors:

USD - United States Dollar

GBP - Great Britain Pound

EUR - Euro

AUD - Australian Dollar

JPY - Japanese Yen

CHF - Swiss Franc

CAD - Canadian Dollar