Quotation

In forex, a “quotation” refers to the price at which a currency pair is traded. It represents the exchange rate between two currencies.

A quotation consists of two prices: the bid price and the ask price. The bid price is the price at which a trader can sell the base currency (the first currency in the currency pair) and buy the quote currency (the second currency in the currency pair). On the other hand, the ask price is the price at which a trader can buy the base currency and sell the quote currency.

For example, let’s consider the EUR/USD currency pair. If the bid price is 1.1200 and the ask price is 1.1205, it means that a trader can sell 1 euro for 1.1200 US dollars and buy 1 euro for 1.1205 US dollars.

The bid price is always lower than the ask price, and the difference between the two prices is called the spread. The spread is the cost of trading and is typically collected by the forex broker.

Quotations in forex are typically displayed with four decimal places. However, some currency pairs may have different decimal places. For instance, the USD/JPY currency pair may be quoted with two decimal places, such as 108.50.

Understanding and interpreting quotations is crucial for forex traders as it allows them to analyze exchange rates, execute trades, and calculate potential profits or losses. Traders need to be aware of both the bid and ask prices to make informed trading decisions.