To have knowledge about the currency in forex you must learn to read the quotes; the quotes come to make the prices of the currencies. Understanding quotes is a crucial skill to achieve a successful financial trader.
Even though you think reading these quotes is difficult, it really is very simple. Look at the following example:
EUR / USD: 1.2345 / 1.2346
Now see how to read the Forex quotes, adding the previous one and all the ones you find from now on.
Selection of Forex pairs
In the jargon of the market, currency pairs are classified into different exchange categories of their characteristics and trading volume. The four primary currency groups are: major pairs, cross pairs, minor pairs, and exotic pairs.
The world’s most important currencies are: the US dollar, the euro, the pound sterling, the Japanese yen, and the Swiss franc. The different combinations of these currencies form the largest group of Forex pairs:
● EUR / USD
● GBP / USD
● USD / JPY
● USD / CHF
It is about the combinations of the previous pairs that are not added to the US dollar. The pairs in this category are:
● EUR / GBP
● GBP / JPY
● CHF / GBP
Although they are not very famous but are regularly negotiated they are pronounced or interpreted like the previous group. We mention the New Zealand dollar, the Canadian dollar and the Australian dollar. By listing these currencies against the US dollar, you will create the group of minor pairs:
● NZD / USD
● CAD / USD
● AUD / USD
Consequently, any other pair that does not belong to the previous categories, is part of the group of exotic pairs. These instruments are not very popular and make up less than 15% of the total Forex volume.
To understand Forex quotes, you need to learn the denominations that traders have given to the different currencies on the planet. You might be a little confused at first when you find names like “Aussie” or “Cable”, but you will discover that they are very simple nicknames that do not affect your ability to perform operations at all.
Prices in Forex quotes.
One of the most important aspects of Forex quotes is the price of the currency pair. The numerical value that appears in the quote shows the price of one currency in relation to another and is the fundamental aspect to determine if an operation is viable or not.
Let’s take the following example: EUR / USD: 1.2345 / 1.2346. As you can see, there are two prices, which in any case represent the value of the base currency (in this case, the euro) based on the quoted currency (US dollar). The first value that appears in the price refers to the sale price, that is, the amount of US dollars you would receive for selling 1 euro. The second value corresponds to the purchase price and shows how many US dollars you would have to pay to buy 1 euro.