We’re going to focusing on understanding the forex currency quote.
Now to do that we have to know about what are the axle major currencies in the market there are basically seven major currencies. they are:
1. EUR/USD: Euro versus U.S. dollar
2. USD/JPY: U.S. dollar versus Japanese yen
3. GBP/USD: Great Britain pound versus U.S. dollar
4. AUD/USD: Australian dollar versus U.S. dollar
5. USD/CHF: U.S. dollar versus Swiss franc
6. USD/CAD: U.S. dollar versus Canadian dollar
7. NZD/USD: New Zealand dollar versus U.S. dollar
Alright 90% of all forex trade basically involves the US dollar.These currencies are deemed the most liquid.
The eight most commonly traded currencies are: USD (U.S. dollar), EUR (euro), GBP (Great Britain pound), AUD (Australian dollar), JPY (Japanese yen), CHF (Swiss franc), CAD (Canadian dollar).NZD (New Zealand dollar).
Lets talk about popular a currencies in that is the euro
and the dollar typically you’ll see that really as
EUR/USD that is the euro & dollar and remember a currency pair is trading one for the other where we have a based currency and a counter currency or the quote currency.Reading Forex quotes is very easy once you get the hang of it, because it only has two components: the base currency and the counter or quote currency. When the dollar is the base currency, the quote as telling you I think it’s worth it another currency.The currency to the left of the forward slash is known as “the base currency” while the currency on the right is termed the quote or counter currency. The base currency ALWAYS has a value of 1.
The position of a currency in the quote is strictly determined and standard. For the Euro and U.S. Dollar pair, it is EUR/USD and never USD/EUR.
Quote the most recent market price of a financial instrument in which a buyer and a seller agree to transact at a special price, usually known as the exchange rate was traded.
Currency quotations appear in pairs. A Forex quote is usually given as EUR/USD = 1.4230. This means: 1 U.S. dollar equals 1.4230 euro.
Forex price quoted to four or five decimal places. Having a pricing that goes to the fifth decimal place has several advantages, such as:
- Reduced difference between the bid and asking price, which translates in smaller transaction costs.
- Better liquidity and improved execution for the trader.
- Higher accuracy in price execution.
In the case of the Japanese yen, the situation is slightly different when compared to other currency pairs.A yen pair is usually given as USD/JPY = 118.43. This means: 1 U.S. dollar is equivalent to 118.43 Japanese yen.
There are two types of quotes:
1. Direct quote: Price of a foreign currency is denominated in certain units of the national currency.
2. Indirect quote: Price of the national currency is denominated in certain units of the foreign currency. For example, USD/JPY is a direct quote for Japan.