Understanding direct quote and indirect quote in forex trading. Now that you start to learn Forex for real, you should have known that the foreign exchance is performed by what so called trading currency pairs. Then, when we are talking about currency pairs, there will be quotes or quotations which refer to the price of these pairs. In addition to these two terms, you need to know about direct and indirect quotes in Forex.

What Are Forex Quotes All About?

So, what are these Forex quotes? Being able to comprehend quotes is valuable for all traders since it allows them to improve their knowledge to the Forex market. As mentioned before, quote has the same sense with the price of currency pairs in Forex trading. Whenever you see a currency pair, it will be shown in symbols such as EUR/USD 1.23456 and USD/GBP 0.56789.

The EUR/USD 1.23456 there means that one Euro is traded for 1.23456 US dollars. To remind you, the first currency symbol in the example refers to base currency while the second currency stands for the quote currency. It’s crucial to remember this since it will help you to understand the meaning of direct quote. In another word, quotes represent the amount of a currency unit.

What Is a Forex Direct Quote?

Then, what is the definition of direct quote in Forex trading? Every quote you find in Forex market can potentially be an indirect quote or direct quote at the same time. It basically depends on your location as well as your domestic currency. In simple words, direct quote refers to a Forex price quotation which can be effortlessly understood by most people without calculating it.

For instance, you are a US citizen with US dollar as your domestic currency. In this case, a USD/GBP 0.67 will be a direct quote for you. It represents that one USD you have can be used to buy 0.67 GBP. On the other hand, if your domestic currency is not USD and GBP instead, you will see the USD/GBP 0.67 as an indirect quote.

This is because you are not provided with the information of how many USD can be purchased with one unit of domestic currency you have without calculating it. At this point, a direct quote explains how many unit of foreign currency can be purchased for a single unit of a domestic currency. This is easy for those who trade currency that is common for them. 

What Is a Forex Indirect Quote?

Now, what is indirect quote all about? In simple words, indirect quote is the exact reverse of direct quote. Instead of showing the rate of a foreign currency in your domestic currency, it displays the rate of a domestic currency in certain foreign currency. As a result, you may need to calculate it first to make it more common and easier to understand the rate.

For example, you are a European citizen and use EUR as your local currency. Then, you see a USD/EUR quote of 0.8765. The quote shows that one USD can be used to purchase 0.8765 Euros. Nevertheless, if your domestic currency is USD dollar, you will see this quote as a direct quote for you. See, it is a bit difficult to understand indirect quote. 

However, it can still be easy to employ. Whenever you have a trip to another country and you find an indirect quote, you can just multiply the amount of what you pay for by the indirect quote so that you can calculate the rate in your domestic currency. As you learn Forex more, you will find that indirect quote is rarely used in trading Forex.