Reading a currency pair like a grown-up

A quote looks like this:

EUR/USD   1.0847 / 1.0849

Four pieces of information are in there, and most beginners read one of them.

Base and quote

The first currency is the base. The second is the quote. The price is how much of the quote currency it takes to buy one unit of the base.

So EUR/USD at 1.0847 means one euro costs 1.0847 US dollars. Not "the euro is worth 1.08 of something" — one euro, priced in dollars. Every decision follows from reading it in that direction:

• Buying EUR/USD means buying euros and selling dollars. You profit if the euro strengthens against the dollar.
• Selling EUR/USD is the reverse — you are short euros, long dollars.

There is no separate instrument for "shorting the dollar". Every forex position is long one currency and short another simultaneously, which is why a strong dollar and a weak euro produce the same chart.

Why the dollar is on one side of almost everything

The BIS Triennial Survey found the US dollar was on one side of 89% of all foreign exchange trades in April 2025, and that the ten most traded pairs all involve it. It works as the market's vehicle currency: converting Mexican pesos to Thai baht is usually two trades through the dollar rather than one direct trade, because the dollar leg is deeper and cheaper.

The practical consequence for a beginner is that dollar pairs — EUR/USD, GBP/USD, USD/JPY — have the tightest spreads and the most predictable behaviour, while "exotic" pairs cost more to trade and move more violently on less news. Learning on a major pair is not timidity; it is choosing the instrument where your costs are lowest while you are worst at this.

Bid, ask, and the cost sitting between them

Two prices are always quoted:

• Bid (1.0847) — what you can sell at.
• Ask (1.0849) — what you can buy at.

The ask is always higher. The gap between them is the spread, here 0.0002 — two pips — and it is the broker's charge for taking the other side.

This is the part worth internalising: you start every trade at a loss. Buy at 1.0849 and the position is immediately worth 1.0847 if you close it. Price has to move two pips in your favour before you are level. That is not a trick; it is the cost of doing business, and it is why a strategy that targets five-pip gains is fighting a two-pip cost on every single trade while a strategy targeting fifty pips barely notices it.

Spread widens when liquidity thins — the gap between the New York close and the Tokyo open, and around scheduled news. A stop placed a couple of pips away can be taken out by a widening spread alone, without price ever really moving.

Reading the fifth decimal

Most brokers now quote an extra digit: 1.08472. That last digit is a fractional pip (sometimes "pipette"), one tenth of a pip. The pip is still the fourth decimal — the fifth is precision, not a new unit.

Yen pairs break the pattern. USD/JPY is quoted to two decimals (151.24), so a pip there is 0.01, not 0.0001. Get this wrong and every risk calculation on a yen pair is off by a factor of 100. Our pip value calculator handles the convention for you; the reason it exists is that this specific mistake is common and expensive.

What a quote does not tell you

It does not tell you the size of your position — that is lots and leverage. It does not tell you what a pip is worth in your account currency, which depends on both the pair and your account denomination. And it says nothing about whether the price is about to move, however confident a chart pattern looks.

What it does tell you, precisely, is what you would pay to enter right now and what you would receive to leave. Read both numbers before every trade. The difference between them is the only cost you can be certain of in advance.

Next: pips, lots and leverage, where the quote turns into money.