Reading a Forex Quote and Understanding the Jargon

ne of the biggest sources of confusion for those new to the currency market is the standard for quoting currencies. In this section, we'll go over currency quotations and how they work in currency pair trades.

Reading a Quote When a currency is quoted, it is done in relation to another currency, so that the value of one is reflected through the value of another. Therefore , if you are trying to determine the exchange rate between the U. S. dollar (USD) and the Japanese yen (JPY), the forex quote would look like this:

This is referred to as a currency pair. The currency to the left of the slash is the base currency, while the currency on the right is called the quote or counter currency. The base currency (in this case, the U. S. dollar) is always equal to one unit (in this case, US$1), 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 US$1 = 119. 50 Japanese yen. In other words, US$1 can buy 119. 50 Japanese yen. The forex quote includes the currency abbreviations for the currencies in question.


Direct Currency Quote vs . Indirect Currency Quote There are two ways to quote a currency pair, either directly or indirectly. A direct currencyquote is simply a currency pair in which the domestic currency is the base currency; while an indirect quote, is a currency pair where the domestic currency is the quoted currency. So if you were looking at the Canadian dollar as the domestic currency and U. S. dollar as the foreign currency, a direct quote would be CAD/USD, while an indirect quote would be USD/CAD. The direct quote varies the foreign currency, and the quoted, or domestic currency, remains fixed at one unit. In the indirect quote, on the other hand, {the schwinn recumbent