Reading a Forex Quote
If you are a newcomer to the world of Forex trading (also known as the Foreign Exchange market, in which world currencies are bought and sold rather than company stocks,) then you will need to familiarize yourself with some of the terminology involved in trading in this volatile market. First of all, the Forex trader should be aware that Forex markets are open 24 hours a day, for five days each week. Anytime a currency is quoted, it is done in relation to another country’s currency; the value of one is always in direct relation to the value of another. When trying to determine theexchange ratebetween the U.S. dollar (USD) and the Japanese yen (JPY), for example, the forex quote would look something like this:
| USD/JPY = 118.75 |
What you see there is referred to as a currency pair. The currency to the left is the base currency, while the currency on the right is called the quote (or counter) currency. The base currency always represents one unit and the quoted currency (in this case, the Japanese yen) is what that one base unit is equivalent to in the other currency. The quote means that $1 = 118.75 Japanese yen. So, for each $1, you can buy 118.75 Japanese yen. The forex quote includes the currency abbreviations for the currencies being observed.
Enjoy the following video that explains more about Forex Quotes in greater depth:
