Forex Quotes

Proper understanding of the way, currencies are quoted, will help a lot in trading Forex. In every Forex transaction, one has to buy a currency and sell another concurrently. Therefore, currencies are constantly quoted in pairs, like USD/JPY or GBP/USD. In case of GBP/ USD, the first one (GBP) is called the base whereas the second one (USD) is called the quote or counter currency. The exchange rate, in case of buying, refers to a quantity of quote currency in units to be paid in order to buy a quantity of base currency in units. For example, if a foreign currency exchange rate is quoted as GBP/USD = 1.7500, it means that a trader pays 1.7500 USD (quote currency) in order to buy 1 pound of British currency (base currency). The exchange rate, in case of selling, refers to a quantity of quote currency in units that will be received by selling a quantity of base currency in units. Thus, if a...

All Forex exchange rates are quoted in terms of currency pairs. Although it might look confusing initially, it is relatively easy to understand. Each currency pair is denoted in the format XXX/YYY as specified by ISO 4217 international three-letter code of the currency . XXX is the “Base Currency” and YYY is the price of one unit of XXX currency. For example with regards to the pairs EUR/USD; GBP/AUD and USD/JPY, the base currency in those pairs are Euro, British Pound and US dollars respectively. The base currency will always have a numerical value of 1. Thus, GBP/AUD will indicate many units of Australian dollar is required to purchase 1 unit of British pound.