Currencies are always quoted in pairs, viz. EUR/USD, USD/JPY, and so on. The reason behind this convention is simple; a currency’s value can only be represented against another currency. For, example, EUR/USD implies the value or exchange rate of Euro against USD. To make the understanding clearer, let’s begin by enumerating the basic concepts:

          Currencies are always quoted in pairs.

§          EUR/USD refers to the two currencies Euro and U.S. Dollar.

          The first is referred to as the base currency, while the second as the quote currency.

          The EUR/USD exchange rate specifies how many US Dollars you have to pay to buy one Euro, or conversely how many US Dollars you obtain when you sell one Euro.  

Typically, when you read Forex quotes on Forex Trading Platforms, they would appear something like:

EUR/USD = 1.2001/1.2003 (or just 1.2001/03)

This quote communicates the following to us:

§          Euro is the “Base Currency”.

§          US Dollar is the “Quote Currency”.

§          The sell quote is displayed on the left and is the price at which you can sell the base currency. It is also referred to as the bid price. Hence, in the above example, you can sell 1 Euro for 1.2001 US Dollars (the Bid price). Sell on Left.

          The buy quote is displayed on the right and is the price at which you can buy the base currency. It is also referred to as the ask or offer price. Hence, in the above example, you can buy 1 Euro for 1.2003 US Dollars (the Ask price). Buy on Right.

          The Bid Price will always be less than the Ask Price (1.2001 < 1.2003). The reason is not difficult to understand, had the reverse been true, a trader would have simply Bought at a lower price and Sold at a higher price- instantly. This would have made him a profit of USD(1.2003 – 1.2001) or USD .0002 without taking any risk or wasting any time.

But, in the above example, the trader would buy at 1.2003 and hence, will have to wait for the Sell Quote to become higher than 1.2003 to make a profit.