To trade forex successfully, the first thing every beginner must learn is how to read a forex quote. If you don’t understand bid and ask prices, spreads, and pips, you’ll have no idea when your trades are making or losing money. In this guide, we’ll break down how forex quotes work, what the bid and ask mean, how brokers use spreads, and how you can tell when you're actually in profit. Whether you're trading EUR/USD, GBP/JPY, or any other pair, these basics apply across the board.
How to Read a Forex Quote and Know When You’re Profitable
When you open a trading platform for the first time, you're met with a list of currency pairs and numbers that may seem confusing. But at the heart of it all is a simple concept: you're buying one currency while selling another. That’s what a forex quote shows.
Let’s break it down in simple steps.
1. Understanding a Forex Quote
In forex trading, currencies are always quoted in pairs — like EUR/USD.
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The first currency (EUR) is called the base currency.
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The second currency (USD) is the quote currency.
If you see EUR/USD = 1.1000, it means 1 Euro = 1.10 US Dollars.
That’s your quote. But in real trading, you’ll usually see two prices listed for every pair, and that’s where the next step comes in.
2. What Are Bid and Ask Prices?
A forex quote will usually look like this:
EUR/USD – 1.0998 / 1.1000
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The Bid is 1.0998 → this is the price you sell at.
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The Ask is 1.1000 → this is the price you buy at.
You’ll always buy at the higher price (ask) and sell at the lower price (bid). This difference between them is called the spread.
3. Why the Spread Matters (And When You Actually Make Money)
Notice in the chart below how the difference between the bid and ask (called the spread) varies between the two markets.
In the first example, the spread is extremely small — just 0.00009. In the second example, it’s much wider at 0.034.
The wider the spread, the more price must move in your favor before you break even. This is why many traders see a negative balance as soon as they open a trade — they’re “paying” the spread.
This is why some traders enter a position and instantly see a small negative balance — it’s because of the spread.
4. What Is a Pip and a Lot in Forex?
To understand how you make money in forex, you need to know two important terms:
🔹 Pip (short for “percentage in point”)
🔹 Lot (the size of your trade)
🔸 What Is a Pip?
A pip is the smallest price change a currency pair can make.
For most currency pairs (like EUR/USD), 1 pip = 0.0001.
So if EUR/USD moves from 1.1000 to 1.1001, that’s a 1 pip movement.
But for pairs with the Japanese Yen (like USD/JPY), a pip is 0.01.
If USD/JPY goes from 145.20 to 145.21, that's also 1 pip.
🔸 What Is a Lot?
A lot is how much of a currency you’re trading — the volume.
Forex brokers use lots to standardize trade sizes:
- A standard lot is 100,000 units of currency. With this size, each pip is worth $10.
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A mini lot is 10,000 units. Each pip is worth $1.
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A micro lot is 1,000 units, making each pip worth $0.10.
💡 How They Work Together
Let’s say you're trading EUR/USD and the price moves by 10 pips:
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With 1 standard lot → $10 × 10 = $100 profit/loss
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With 1 mini lot → $1 × 10 = $10 profit/loss
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With 1 micro lot → $0.10 × 10 = $1 profit/loss
So even a small price change can make a big difference — depending on your lot size.
✅ Final Tip
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Pip = how much the price moves
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Lot = how big your trade is
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Your earnings or losses = pip movement × lot size
