Forex Trading Tips - An Overview Of Forex Quotes

The following extract is from a series of financial education articles and videos on supplementing your income with forex trading systems …

The first time that most trading learners pull up forex quotes and try to make sense of them can be confusing for those who are only familiar with ordinary stock exchange quotes. The only real similarity between common stock quotes and forex quotes is the nature of the information that they provide. While a forex quote does, ultimately, tell you the price, it is not as readily apparent as it would be with ordinary stock and requires a bit of interpreting.

The first part of the quote lets the forex trader know which currency is involved. The country listed first is referred to as the base currency. This means the trader currently holds that currency and he is using it to buy the quote currency, sometimes called the trade currency. For example, a quote that reads USD/JPY means that the forex trader currently holds United States Dollars and wants to trade them for Japanese Yen. Forex quotes always start this way, with the two currencies involved forming what's called the cross.

The second part of forex quotes that you need to look at is the pricing segment of the quote. To continue the example from above, if the quote read USD/JPY=117.57, then the trader knows that for every 1 US dollar he trades, they will get 117.57 Japanese Yen in exchange. While this may seem really simple, there are a few more details about these quotes that the forex trader needs to take into account before proceeding with the foreign exchange trade.

Following the initial line of the quote, which contains the two currencies that form the cross and the exchange rate, is another line of information. This is probably more familiar to common stock traders. Bid prices and ask prices, which make up an integral part of forex quotes, function in trading forex much the same way. The bid price is the price at which you can sell the currency. In other words, that is the price that people are willing to buy it. The buy price is what you will have to pay if you want to buy the currency. There is usually a difference between these two numbers, but it is seldom substantial.

Most of the examples of forex quotes that you will see as you visit different forex trading platforms across the internet will involve some mixture of the Canadian Dollar, US Dollar, Australian Dollar, Euro, Japanese Yen, and Swiss Franc. The reason for this apparent predominance is that nearly 85% of all real forex quotes involve the currencies of these six nations. These are without question the most stable economies in the world market and are least susceptible to recession and market crashes. This knowledge gives forex traders the confidence to buy and sell foreign currencies unreservedly.

For more articles on 4x trading, go here: Currency Exchange