How to Read a Currency Pair and a Forex Quote

If you have ever looked at a forex quote and not been sure what the number meant, this is the piece that fixes that. It covers exactly four things: what a pair is, how to read the quote, what a pip is, and what the two prices you see actually cost you.

What a currency pair is

A currency pair is a price for one currency expressed in another. Every pair has a base currency (first) and a quote currency (second). The number is how much of the quote currency it takes to buy one unit of the base.

EUR/USD at 1.1300 means one euro costs 1.1300 US dollars. If it moves to 1.1400, the euro has strengthened against the dollar — the same euro now costs more dollars. If it moves to 1.1200, the dollar has strengthened.

That is the whole trick to reading FX: you are never looking at the value of a currency, only at its value against one other currency. A currency can rise against one counterpart and fall against another on the same day.

Quote conventions are fixed by market convention, not by preference. EUR/USD is always quoted that way round; you will not see USD/EUR on a professional platform. The usual precedence runs EUR, GBP, AUD, NZD, then USD, then everything else.

Majors, minors and exotics

• Majors — pairs containing the US dollar and one other heavily traded currency: EUR/USD, USD/JPY, GBP/USD, USD/CHF, AUD/USD, USD/CAD, NZD/USD. These are the most liquid and typically carry the narrowest spreads.
• Minors or crosses — liquid currencies traded against each other without the dollar: EUR/GBP, EUR/JPY, AUD/NZD.
• Exotics — a major currency against a smaller or less freely traded one, such as USD/TRY or USD/THB. Thinner liquidity, wider spreads, larger and faster moves, and greater exposure to a single country's politics and capital controls.

The categories are a liquidity description, not a difficulty ranking. Exotic pairs are not "advanced"; they are simply more expensive to trade and more prone to gaps.

Pips, and the exceptions

A pip is the conventional smallest unit of price movement in a pair. For most pairs it is the fourth decimal place, 0.0001. EUR/USD moving 1.1300 → 1.1301 is one pip.

The main exception is pairs quoted in Japanese yen, where a pip is the second decimal place, 0.01. USD/JPY moving 150.10 → 150.11 is one pip, not one hundred.

Most platforms now quote an extra digit — a pipette, or fractional pip — so EUR/USD shows as 1.13005. That fifth digit is a tenth of a pip. It is a pricing precision improvement, not a different unit.

What a pip is worth depends entirely on position size. A standard lot is 100,000 units of the base currency, a mini lot 10,000, a micro lot 1,000. On a 100,000-unit EUR/USD position, one pip is roughly $10; on a micro lot, roughly $0.10. Pip value for pairs where the US dollar is not the quote currency has to be converted, and shifts as prices move.

Bid, ask and the spread

You are always shown two prices. The bid is what you can sell at. The ask (or offer) is what you can buy at. The ask is always higher. The gap between them is the spread, and it is a cost you pay the moment you open a position — a new trade starts slightly negative by exactly that amount.

Spreads are not fixed. They widen when liquidity thins: outside main session overlaps, around scheduled economic releases, and during market stress. Some accounts show a raw spread plus a separate commission; others show a wider spread with commission built in. Neither is inherently cheaper — the total cost per round turn is what matters, and it is worth calculating rather than assuming.

Spread is also not the only holding cost. Positions held past the daily rollover are credited or debited swap based on the interest rate differential between the two currencies, which can be meaningful on longer holds.

The one calculation worth doing

Before anything else, work out what a single pip is worth on the position size you are considering, and what a realistic adverse move in that pair costs you in your account currency. That number, not a strategy, is what determines whether a position is survivable.

Next: how the market is structured and who you are actually trading against.