How to read a candlestick
Four prices describe a whole interval. Read the body and wicks, then see which question the candle leaves open.
Read articleRead the pair in order
In EUR/USD, the euro is the base currency and the dollar is the quote currency. A displayed rate of 1.1000 means one euro is worth 1.1000 dollars. Reversing the pair changes the unit. Write out the pair before doing the arithmetic, especially when you compare quotes from different screens.
Identify the two prices
Suppose the bid is 1.1000 and the ask is 1.1002. To buy euros you pay the ask. To sell euros you receive the bid. Subtracting the bid from the ask gives 0.0002 dollars per euro. Charts may display a midpoint, so open the order ticket when you want to check the price for a particular side.
Convert the spread to cash
Buying 10,000 euros at 1.1002 costs 11,002 dollars. Selling straight back at 1.1000 returns 11,000 dollars, assuming the quote stays fixed and the entire trade executes at those prices. The difference is two dollars before other charges. At a size of 1,000 euros the same quoted spread costs twenty cents.
Compare like with like
Record the timestamp, size, quote currency and both prices. Check the schedule for separate commissions, overnight financing and any conversion into your account currency. Those details help explain a difference between the simple spread calculation and the final amount shown on a statement.
