What if you see something like this? USD/CAD 1.0546/50, as a trader you might get confused. This is what they call Forex Quote. It is a pair of currencies, one is the selling and the other is buying currency, sometimes called as bid price and ask price.
The first number is called the base currency while the other is quote currency. Base currency value is always permanent 1. The latter tells you how many of the quote currency can you buy using your base currency.
The numbers 1.0546/50 is a combination of two numbers (1.0546 and 1.0550). The lower number is called the bid price and the higher one is called the ask price. Bid price is how much a dealer will purchase the base currency and the ask price is how much the dealer is willing to sell it for. For example: USD/CAD 1.0546/50,you can sell US dollar and receive 1.0546 Canadian Dollar, on the other hand if you would like to buy US dollar, you would have to pay 1.0550 Canadian Dollar for each US Dollar.
Here are some other jargons that you will encounter 1)” spread” -it is defined as the difference between the bid price and the ask price. 2) “pip” – defined by each tiny 0.01. In most cases, traders do their trading in US dollars, Great Britain pounds, Euros, Japanese Yen, Swiss francs and Australian dollars. Decreased amount of traded currencies could run in much larger spreads. But don’t think that a tiny spread means tiny profit.
Same trades can be repeated during the day of the same week. It only mean that you can read the same Forex quote over again and realize that the tiny spread is important than it’s bare size.
Understanding a Forex quote is an essential part of being a Forex trader, because it gives you all the immediate information needed to execute a trade. So don’t get intimidated as these confusing numbers can make you money.