Currency pairs: how to read a quote, the bid, the ask and the spread

In forex, you never trade a currency on its own. You always swap one currency for another, hence the idea of a currency pair. Reading a quote is a trader's first technical skill: it tells you what you are buying, what you are selling and how much it costs.

Base currency and quote currency

A pair is written with two three-letter codes defined by the ISO 4217 standard: EUR for the euro, USD for the US dollar, GBP for the pound sterling, JPY for the yen, CHF for the Swiss franc, and so on.

• The base currency comes first: it is the one you buy or sell.
• The quote currency comes second: it is the currency in which the price is expressed.

When you read EUR/USD = 1.0850, it means one euro is worth 1.0850 dollars. If the quote rises to 1.0900, the euro has strengthened against the dollar: you need more dollars to get one euro. If it drops to 1.0800, the dollar has strengthened.

The order of the currencies follows a market convention. The euro comes first against every other currency, then the pound, then the Australian and New Zealand dollars, then the US dollar. That is why we write EUR/USD and GBP/USD, but USD/JPY and USD/CHF.

Majors, minors and exotics

Not all pairs are equal. They are classified by liquidity, meaning the volume traded each day, which directly affects their cost.

EUR/USD is the most traded pair in the world. Its spread is often below one pip at competitive brokers during active hours. At the other end, an exotic pair can show a spread ten times higher, plus sharp moves tied to the political or monetary situation of the country involved.

Bid and ask: the two prices in a quote

On your platform, every pair actually shows two prices, not one.

• The bid: the price at which the market buys the pair from you, so the price at which you sell.
• The ask (sometimes called the offer): the price at which the market sells you the pair, so the price at which you buy.

The ask is always slightly higher than the bid. If EUR/USD shows 1.0849 / 1.0850, you would buy at 1.0850 and sell at 1.0849. Platform charts usually display the bid price, which explains why a buy order can trigger even though the candle never quite touched your level.

The spread, your first cost

The spread is the difference between the ask and the bid. It is the main source of income for many brokers, and it is a cost you pay on every trade, winning or losing. As soon as you open a position, you are slightly in the red, by an amount equal to the spread.

The spread is not fixed. It widens when liquidity dries up: late at night after New York closes, just before the Friday close, on bank holidays and above all around major economic releases. A 0.8-pip spread in the middle of the London session can jump to several pips for a few seconds when US jobs data comes out.

Reading a quote in practice

Take GBP/USD quoted at 1.2698 / 1.2700. One pound is worth about 1.27 dollars. If you think the pound will strengthen, you buy at 1.2700. For the trade to turn profitable, the bid has to climb back above 1.2700, meaning the market first has to cover the 2-pip spread.

With USD/JPY at 149.80 / 149.82, one dollar is worth about 149.80 yen. The price has only two decimals, because a single yen has a low unit value. You will see in the next lesson that the pip is measured on the second decimal here, not the fourth.

The same currency can rise against one currency and fall against another on the same day. If EUR/USD slips while EUR/JPY climbs, the dollar is strengthening sharply while the yen is weakening. Reading several pairs together helps you see which currency is really driving the move.

1. Identify the base currency: it is the one you buy or sell.
2. Spot the bid and the ask, and therefore the real price of your entry.
3. Work out the spread and what it means for your position size.
4. Check the time: a quiet session or an upcoming release changes everything.