Pairs and quotes: what 1.0850 means
The chart shows two currencies at once
Look at a EUR/USD chart and you see one line. That line is a ratio, not a single price. The chart is drawn by dividing the value of the euro by the value of the US dollar at each moment. When the line rises, the euro is strengthening against the dollar or the dollar is weakening against the euro. The chart does not tell you which of those two things is happening.
The first currency in the pair is called the base currency. The second is called the quote currency. In EUR/USD, the euro is the base and the US dollar is the quote. A quote of 1.0850 means one unit of the base costs 1.0850 units of the quote. That is why the number is always written with the base first.
If you think in pesos, the chart is still showing you dollars. The euro is not priced in pesos on this chart. To get a peso value you need a second step: convert the US dollar amount into pesos using the current USD/PHP rate. That rate moves too, so the peso value of the same pip changes even when EUR/USD does not move.
Which number in the quote moves when the price changes?
On EUR/USD, the quote is normally shown to four decimal places. The last of those four places is the pip. A move from 1.0850 to 1.0851 is one pip. A move from 1.0850 to 1.0860 is ten pips. The digits to the left of the last place change much less often, so the last place is where the active movement happens.
The money value of that last place depends on your position size, not on the chart. On a standard lot of EUR/USD, one pip is worth 10 US dollars. On a mini lot it is worth 1 US dollar. On a micro lot it is worth 10 US cents. The chart looks the same in all three cases. Only the peso amount in your account changes.
At an example rate of ₱56 to the dollar, one pip on a standard lot is about ₱560. That figure is not fixed. The USD/PHP rate varies between brokers and changes through the day. Brokers may also round the pip value, charge a commission on top of the spread, or quote a spread that changes with market conditions. Treat the peso number as an estimate, not a contract.
Reading the gap between the two numbers
A live quote usually shows two numbers side by side, like 1.0850 / 1.0852. The first is the bid, the price at which you can sell the base currency. The second is the ask, the price at which you can buy it. The ask is always higher than the bid. The gap between them is the spread.
The spread is a cost you pay on entry. If you buy at 1.0852 and the bid is still 1.0850, you are two pips behind before the market moves at all. On one standard lot, two pips is 20 US dollars, which is about ₱1,120 at an example rate of ₱56 per dollar. You need the price to move in your favour by more than the spread before the position is at break-even.
Spread sizes vary by broker and by market conditions. They often widen when major news is released or when trading is thin. A broker that shows a tight spread may charge a separate commission, so compare the total cost, not just the spread. The chart shows you the price. It does not show you the commission.
EUR/USD 1.0850 / 1.0852
| Step | Amount | Note |
|---|---|---|
| Bid (sell price) | 1.0850 | The price at which the broker will buy from you. |
| Ask (buy price) | 1.0852 | The price at which the broker will sell to you. |
| Spread | 0.0002 | 1.0852 minus 1.0850, the difference between the two quotes. |
| Spread in pips | 2 pips | 0.0002 divided by 0.0001, the size of one pip. |
| Pip value on one standard lot | 10 US dollars | 100,000 units times 0.0001, as given. |
| Pip value in pesos | ₱560 | 10 US dollars times an example rate of ₱56 per dollar. The rate varies. |
| Spread cost in pesos | ₱1,120 | 2 pips times ₱560 per pip. |
Brokers may round the pip value, charge a commission on top of the spread, or quote a spread that changes with market conditions. The peso conversion uses an example rate only and will differ in practice.
Doing it once, step by step
The following steps show you how to read a EUR/USD quote on a chart and turn it into a peso figure. Do them in order, using the same example numbers throughout.
- 01
Find the two numbers on the chart
Open a EUR/USD chart and look for the current quote, usually shown at the top or bottom of the screen. You will see two numbers separated by a slash, such as 1.0850 / 1.0852. The first is the bid and the second is the ask. Write both down before you do anything else.
- 02
Identify the base and the quote currency
The pair is written EUR/USD, so the euro is the base and the US dollar is the quote. The number tells you how many US dollars one euro costs. If the quote is 1.0850, one euro costs 1.0850 US dollars. The chart is not showing you pesos at this point.
- 03
Count the pips in the spread
Subtract the bid from the ask. With 1.0850 and 1.0852, the difference is 0.0002. The last decimal place is the pip, so 0.0002 is two pips. This is the spread. It is the first cost you face on any trade.
- 04
Work out the pip value in dollars
Decide your position size. On a standard lot of EUR/USD, one pip is worth 10 US dollars. Two pips is therefore 20 US dollars. On a mini lot it would be 2 US dollars, and on a micro lot it would be 20 US cents. The chart does not change, only the money value.
- 05
Convert the dollar amount to pesos
Use an example rate of ₱56 to the dollar. Multiply 20 US dollars by 56 to get about ₱1,120. That is the spread cost in pesos on one standard lot. Remember that the USD/PHP rate varies between brokers and over time, so your actual figure will differ.
- 06
Check the break-even move
The price must move in your favour by more than the spread before you are at break-even. If you bought at 1.0852, you need the bid to rise above 1.0852. That is a move of two pips, or about ₱1,120 on a standard lot. Until then, the position is losing by the spread.
The mistake most people make here
A common mistake is to read 1.0850 as a single price and forget that another price sits right beside it. The gap between the two is a cost that is already there before the market moves at all. On one standard lot of EUR/USD, a two-pip spread is about ₱1,120 at an example rate of ₱56 per dollar. Instead of watching only the big number, look at both numbers and work out the spread in pips first. That tells you how far the price must move before the position is at break-even.Check yourself
If EUR/USD is quoted at 1.0850 / 1.0852 and the exchange rate is ₱56 per dollar, what is the spread cost in pesos on one standard lot?
The spread is 1.0852 minus 1.0850 = 0.0002, which is 2 pips. One pip on a standard lot is 10 US dollars, so 2 pips is 20 US dollars. At ₱56 per dollar, 20 times 56 = ₱1,120.
What does the number 1.0850 actually mean?
It means one euro costs 1.0850 US dollars. The first currency in the pair is priced in the second currency.
Questions that come up next
Which currency in EUR/USD is the one I am actually buying?
You are always buying or selling the base currency, which is the first one in the pair. In EUR/USD the base is the euro. So a buy order means you are buying euros and paying for them in US dollars. The chart shows the euro's price in dollars, not the dollar's price in euros.
Why does the peso value of my position change when EUR/USD has not moved?
Because your account is in pesos, but the profit or loss on EUR/USD is calculated in US dollars first. That dollar amount is then converted into pesos at the current USD/PHP rate. If the dollar strengthens against the peso, the same dollar profit is worth more pesos. If the dollar weakens, it is worth fewer pesos. So two rates are moving at once, not one.
Does a smaller position size change the pip value on the chart?
No, the chart looks exactly the same whatever size you trade. The pip value changes only in money terms. On a standard lot one pip is about 10 US dollars, on a mini lot about 1 US dollar, and on a micro lot about 10 US cents. The line on the screen does not know how much you have on.
What does the second number in a quote like 1.0850 / 1.0852 mean?
The first number is the bid, the price at which you can sell the base currency. The second is the ask, the price at which you can buy it. The ask is always the higher of the two. The difference between them is the spread, and it is a cost you pay as soon as you open a position.
Why is the quote shown to four decimal places and not two?
Because the movements that matter on EUR/USD are small. Two decimal places would hide almost all of them. The fourth decimal place is the pip, and it is the one that changes most often. Watching the last place tells you how far the price has actually moved.
Is the pip value in pesos the same at every broker?
No, it varies. The USD/PHP rate each broker uses can differ, and some brokers round the pip value. Some charge a commission on top of the spread, and spreads themselves change with market conditions. The peso figures here use an example rate of ₱56 to the dollar and are estimates only.
The words used on this page
- Base currency
- The first currency written in a pair. In EUR/USD the base is the euro. Its price is always shown in units of the second currency.
- Quote currency
- The second currency written in a pair. In EUR/USD the quote currency is the US dollar. The number next to the pair tells you how many dollars one euro costs.
- Pip
- The last decimal place in a quote. On EUR/USD that is the fourth decimal place, so a move from 1.0850 to 1.0851 is one pip. The money value of a pip depends on your position size.
- Bid
- The price at which you can sell the base currency. It is the lower of the two numbers in a live quote. If you are closing a buy position, you sell at the bid.
- Ask
- The price at which you can buy the base currency. It is the higher of the two numbers. The gap between the ask and the bid is the spread.
- Spread
- The difference between the bid and the ask. It is a cost that exists before the market moves at all. On EUR/USD a two-pip spread means the price must move two pips in your favour just to reach break-even.
What to take away
- A quote is a ratio: the first currency priced in the second, so 1.0850 means one euro costs 1.0850 US dollars.
- The last decimal place is the pip, and its money value comes from your position size, not from the chart.
- The gap between the bid and the ask is a cost you pay before the market moves, so work out the spread in pips first.
- Peso values change with the USD/PHP rate as well as with EUR/USD, so treat any peso figure as an estimate.