How to read currency price listings

Forex trading is about selling one currency and buying another one at the same time. Forex (Foreign Exchange), uses language not employed elsewhere in the investing domain. Defining those terms by example goes a long way toward removing the scary exotic mystique.

Currency dealing is always done in pairs. In other investments, such as shares, money is paid for a "physical" product (a percent of ownership, a promise to pay interest etc)

In Forex, money is traded for money. Euros are traded for dollars, dollars for yen, yen for euros etc. There are loads of trading currency pairs that take part in the currency exchange markets.

The primary players are US Dollar (USD), Euro (EUR), Australian Dollar (AUD), British Pound (GBP), Canadian Dollar (CAD), Japanese Yen (JPY) and Swiss Franc (CHF). Most daily deals involve trading in these currencies.

When reading quotes, you'll see prices listed as:

Name Bid Ask Change % Change High Low Time

EUR/USD 1.1901 1.1903 -0.0091 -0.76% 1.2024 1.1891 15:26

The currency listed on the left is called the 'base currency' (EUR) and the second is the 'quote currency' (USD).

The 'bid' is the price at which brokers are willing to buy the base currency. The 'ask' price is that at which brokers are willing to sell the base currency. The quotes are always listed from the brokers' standpoint. So if you want to buy the base currency the ask price applies. If you want to sell the base currency the bid price applies.

EUR/USD 1.1901/03 means

• If you buy 1 EUR you will pay 1.1903 USD


• If you sell 1 EUR you will receive 1.1901 USD

The difference between bid price and ask price at a single specific time is called 'the spread'. The spread is measured in pips (price interest points). The 'pip' is the smallest increment by which the price changes.

If the bid price of the EUR/USD pair changes from, say, 1.1901 to 1.1902 that's a single pip. That's a (bid or ask) price at two different times. Remember not to mix up this difference with the spread, which is a difference between the bid and ask price at a single, specific time.

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