Reading a Forex Quote

Look at the board at any currency exchange counter and you will see two prices for each currency: "We Buy" and "We Sell." The counter buys from you cheap and sells to you dear, and the gap between the two is how it makes money. A forex quote works exactly the same way. Once you can read those two numbers, you know what every trade really costs.

The two-sided quote

A forex quote always shows two prices:

EUR/USD 1.0848 / 1.0850

• The left number, 1.0848, is the bid. It is the price you get when you sell.
• The right number, 1.0850, is the ask. It is the price you pay when you buy.

The ask is always higher than the bid. Many platforms show a fifth, smaller digit, such as 1.08483. That is a pipette, one tenth of a pip.

The spread: your entry fee

The spread is the gap between the bid and the ask:

• 1.0850 − 1.0848 = 0.0002 = 2 pips

You pay the spread every time you open a trade. If you bought and sold instantly, you would lose those 2 pips. On a 10,000-unit trade, where each pip is worth $1, that is $2.

Spreads are not fixed in stone:

• They are tightest on major pairs during busy sessions.
• They widen in quiet hours, around big news and on exotic pairs.
• Some accounts have variable spreads that change with the market; others charge a smaller spread plus a separate commission per trade.

Worked example: what spreads cost over a month

You place 20 trades a month, each 10,000 units of EUR/USD, with an average spread of 1.5 pips.

• 20 trades × 1.5 pips × $1 = $30 a month

On a $1,000 account, that is 3% of your account every month in costs, before you have won or lost a single trade. Trading less often, or with tighter spreads, matters more than most beginners think.

Lot sizes

Forex trades are measured in lots, which are standard bundles of the base currency.

Lot type	Units	Shown on platform as	Pip value on EUR/USD
Standard lot	100,000	1.00	$10
Mini lot	10,000	0.10	$1
Micro lot	1,000	0.01	$0.10

Most platforms let you trade in steps of 0.01 lots, so 0.03 lots means 3,000 units, worth about $0.30 per pip on EUR/USD. Beginners should start with micro lots. It is very easy to type 1.00 when you meant 0.10, which is a trade ten times bigger than planned, so always double-check the size field.

Order types

An order is your instruction to the broker. These are the ones you will use most.

• Market order: buy or sell right now at the best available price. Fast and simple, but in fast markets the fill may be slightly different from the price you saw. That difference is slippage.
• Limit order: buy or sell only at a set price or better. A buy limit sits below the current price ("buy if it dips to here"); a sell limit sits above it ("sell if it rises to here").
• Stop order: becomes a market order once price reaches a set level. A buy stop sits above the current price ("buy if it breaks higher"); a sell stop sits below it ("sell if it breaks lower").
• Stop loss: a stop order attached to an open trade that closes it if price moves against you to a chosen level.
• Take profit: a limit order attached to an open trade that closes it when price reaches your target.

Order	Placed where	Use it when
Market	Current price	You want in now
Buy limit	Below price	You want to buy a dip
Sell limit	Above price	You want to sell a rally
Buy stop	Above price	You want to buy a breakout
Sell stop	Below price	You want to sell a breakdown

Worked example: three ways into the same pair

EUR/USD is quoted at 1.0848 / 1.0850. You want to buy 0.10 lots (10,000 units, $1 per pip).

1. Market order: you click Buy and get filled at about 1.0850, the ask.
2. Buy limit at 1.0820: you think 1.0820 is a good support area. Your order waits and only fills if price dips there.
3. Buy stop at 1.0900: you only want to buy if price breaks above 1.0900, which has stopped the price before. Your order waits above the market.

Say you choose the buy limit at 1.0820 and attach:

• Stop loss at 1.0790: 30 pips below entry, so you risk 30 × $1 = $30
• Take profit at 1.0880: 60 pips above entry, so you aim for 60 × $1 = $60

You have planned to risk $30 to make $60 before the trade even exists. One detail: because you exit a buy trade by selling, your stop and target are triggered by the bid price, not the ask.

Risk note: Stop losses usually limit your loss, but they are not a guarantee. In very fast markets or over a weekend gap, your stop can fill at a worse price than you set.

Key takeaways

• Every quote has a bid (where you sell) and an ask (where you buy).
• The spread is the gap between them and a cost on every trade; it adds up quickly if you trade often.
• A standard lot is 100,000 units, a mini lot 10,000 and a micro lot 1,000.
• Market orders fill now; limit orders wait for a better price; stop orders wait for a breakout.
• Attach a stop loss and take profit so every trade has a planned exit.

Up next: Candlesticks Explained, the first lesson of Charts & Technical Analysis.