Reading Forex Quotes

Currencies are always quoted in pairs, such as EUR/USD or USD/JPY. The reason they are quoted in pairs is because in every foreign exchange transaction, you are simultaneously buying one currency and selling another. The above image shows an example of a foreign exchange rate for the Euro versus the U.S. dollar

The first listed currency to the left of the slash (“/”) is known as the base currency (in this example, the Euro), while the second one on the right is called the counter or quote currency (in this example, the U.S. dollar).

When buying, the exchange rate tells you how much you have to pay in units of the quote currency to buy one unit of the base currency. In the example above, you have to pay 1.35120 U.S. dollars to buy 1 Euro.

When selling, the exchange rate tells you how many units of the quote currency you get for selling one unit of the base currency. In the example above, you will receive 1.35120 U.S. dollars when you sell 1 Euro.

The base currency is the “basis” for the buy or the sell. If you buy EUR/USD this simply means that you are buying the base currency and simultaneously selling the quote currency. In caveman talk, “buy EUR, sell USD.”

You would buy the pair if you believe the base currency will gain value (appreciate) relative to the quote currency. You would sell the pair if you think the base currency will lose value (depreciate) relative to the quote currency.