Prices, Quotes and Indications

The price of a currency (in terms of the counter currency), is called “Quote”. There are two kinds of quotes in the Forex market:

Direct Quote: the price for 1 US dollar in terms of the other currency, e.g. –Japanese Yen, Canadian dollar, etc.

Indirect Quote: the price of 1 unit of a currency in terms of US dollars, e.g. –British pound, euro.

The market maker provides the investor with a quote. The quote is the price the market maker will honor when the deal is executed. This is unlike an “indication” by the market maker, which informs the trader about the market price level, but is not the final rate for a deal.

Cross rates – any quote which is not against the US dollar is called “cross”. For example, GBP/JPY is a cross rate, since it is calculated via the US dollar. Here is how the GBP/JPY rate is calculated:

GBP/USD = 1.7464;

USD/JPY = 112.29;

Therefore:  GBP/JPY = 112.29 x 1.7464 = 196.10.