Forex Trading: Learn how to Read A Forex Quote

Forex is an abbreviated name for “foreign exchange.”  The Forex market is a non-stop cash market where the currencies of nations are bought and sold, typically by way of brokers. For instance, you buy Euros, paying with U.S. Dollars, or you sell Euros for Japanese Yen. 

The value of your Forex investment increases or decreases because of changes in the currency exchange rate or Forex rate. These shifts frequently result from economic and political factors, like the price of oil or political unrest. To better understand how the exchange rate can affect the value of your Forex investment, this article shows you how to read a Forex quote.

Forex quotes are always expressed in pairs. In the following example, your “pair” of currencies are the U.S. Dollar (USD) and the Euro (EUR). The Forex quote, USD/EUR = 265.50, shows that one U.S. dollar is equivalent to 265.50 Euros. The currency to the left of the / (USD in this case) is known as base currency and its value is always one. The currency to the right of the / (EUR in this case) is known as the counter currency. In this example, one USD can buy 265.50 EUR, since it is the stronger of the two currencies.

Since the U.S. dollar is regarded as the central currency of the Forex market, it is always treated as the base currency in any Forex quote where it is one of the pairs. Incidentally, the U.S. Dollar is involved in almost 90% of all Foreign exchange transactions.

In this example, your “pair” of currencies are the Japanese Yen (JPY) and the Euro (EUR). The Forex quote, JPY/EUR= 175.10, means that one Japanese Yen is equal to 175.10 Euros. The currency to the left of the / (JPY in this instance) is referred to as base currency and its value is one. The currency to the right of the / (EUR in this case) is referred to as the counter currency. In this example, 1 JPY can buy 175.10 EUR, since it is the stronger of the 2 currencies.

The goal of any Forex trading system is to make money from foreign currency movements. This requires adequate training in basic Forex principles, such as performing a Technical Analysis, utilizing Forex charts and Stop/Loss tools, and keeping up-to-date with economic and political events. In a sense, Forex training never ends.

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