The pair: base over quote
A Forex pair is written as base/quote, separated by a slash. EUR/USD: EUR is the base, USD is the quote. The price reflects how many units of the quote currency one unit of the base buys.
EUR/USD at 1.0850 means one euro buys 1.0850 US dollars. USD/JPY at 149.50 means one US dollar buys 149.50 Japanese yen. The base is what the trader is long when buying the pair; the quote is what the trader is short.
Reading the pair correctly determines the direction. A trader bullish on the euro buys EUR/USD (long the base). A trader bullish on the dollar against the euro sells EUR/USD or buys USD/CHF or USD/JPY — the choice depends on which counter-currency the trader expects to weaken.
Bid and ask: the two-sided quote
Forex quotes are two-sided. The lower number is the bid — the price the broker pays to buy the base from the trader. The higher number is the ask — the price the broker charges to sell the base to the trader.
EUR/USD at 1.0820 / 1.0822: a trader selling EUR/USD opens at 1.0820. A trader buying EUR/USD opens at 1.0822. Closing happens at the opposite side: a long position closes at the bid (1.0820), a short position closes at the ask (1.0822). The trader pays the bid-ask gap on every round trip.
Some platforms display bid first, ask second; others display ask first. The convention is brokers' choice. Look for the lower and higher number — that distinction is invariant. The spread is the difference between them, in pips.
Pips, pipettes, and decimal precision
On most pairs, the Pip is the fourth decimal place. EUR/USD at 1.0850 has the pip at the position of the 5: 1.0850 → 1.0851 is one pip. A fifth digit, when displayed, is the pipette — one tenth of a pip used in fractional pricing. EUR/USD displayed as 1.08502 has 1.0850 as the pip and 2 as the pipette.
JPY pairs use a shorter convention: pip at the second decimal. USD/JPY at 149.50 → 149.51 is one pip. A third digit, when displayed, is the pipette. USD/JPY displayed as 149.503 has 149.50 as the pip and 3 as the pipette.
The convention matters when reading a spread quote. EUR/USD with bid 1.08200 and ask 1.08217 has a spread of 1.7 pips (17 pipettes). USD/JPY with bid 149.500 and ask 149.515 has a spread of 1.5 pips. The pipette display is more precise; the pip is the unit by which spread is conventionally communicated.
From quote to dollar cost
Three numbers turn a quote into a dollar cost. The pair determines pip value; the spread determines entry cost; the position size scales both.
Worked example: EUR/USD at 1.0820 / 1.0822 (2-pip spread), 1 standard Lot size (100,000 EUR), USD account.
Pip value = 0.0001 × 100,000 = $10 per pip (USD is the quote, no conversion). Spread cost at entry = 2 pips × $10 = $20. The position opens immediately worth $20 less than its entry price suggests, in cash terms.
On a round trip: 2-pip entry spread + 2-pip exit spread = $40 round-trip cost on this single position. The market must move 4 pips in the trader's favour to break even on cost — before any consideration of swap or commission.
On USD/JPY at 149.50 / 149.52 (2-pip spread), 1 standard lot, USD account: pip value = ¥1,000 ÷ 149.50 = $6.69 per pip. Spread cost at entry = 2 × $6.69 = $13.38. Round-trip cost = $26.76. The same 2-pip spread costs less in dollars on USD/JPY than on EUR/USD, because pip value differs across pairs.
What the quote does not tell you
The displayed quote shows bid, ask, and instrument. It does not show: overnight financing rate (swap), per-lot commission, slippage history during data releases, or the broker's hedging behaviour for the trader's order.
All of these affect the all-in cost of the trade and are documented in the broker's contract specifications and terms, not in the price quote itself. A 0.3-pip spread on EUR/USD on a raw-spread account looks cheaper than 1.2 pips on a standard account — until per-lot commission of $7 round-trip is added, narrowing the gap.
Reading a quote competently is a starting point. It tells the trader the entry cost and the unit of price movement; it does not tell the trader the holding cost, the execution risk during news events, or the fill quality on stop orders. Those layers come from the broker's documented terms, not from what is displayed on the trade ticket.