Understanding the Forex exchange quote system is essential to the success of Forex trading.

On the Forex, currency quotes come in pairs. The first currency is called the base currency, while the second is called the counter or the quote currency. The Forex quote consists of five numbers or digits, with the last digit called a point or a pip.

PIP stands for "price interest point”. A pip is the smallest move a currency can make. One pip is usually equal to 0.0001. For example, if the EUR/USD pair rises from 1.2240 to 1.2295 it means the price changed or rose by 55 pips.

The bid is an offer made by the Forex trader to buy a currency. In other words, the bid is what someone is willing to pay for a particular currency while the ask price is the price a seller is will accept for a currency, also known as the offer price.

A direct-rate Forex quote is a quote against the US Dollar. A currency not quoted against the US Dollar is called a cross-rate.

Some major currency pairs are EUR/USD, GBP/USD, and USD/JPY. For example, a Forex quote of EUR/USD 1.3300 means that one 1 Euro is equal to 1.3300 units of the U.S. Dollar. When the number of the quote (1.3300) increases, it means that the value of the Euro is appreciating while the value of the U.S. Dollar is depreciating.

Currency pairs are normally traded in 100,000 units of the base currency. For example, if you were to buy EUR/USD at 1.3300, as in the above example, you would be paying $133,000 Dollars for 100,000 Euros.