Pairs and quotes: what 1.0850 means
What you learn in 3 minutesA quote like 1.0850 is just the price of one currency in another. Here, one euro costs 1.0850 US dollars. The last decimal place is called a pip, and on a standard lot of EUR/USD it is worth 10 units of the quote currency, so 10 US dollars. At an example rate of ₱56 to the dollar, that is about ₱560 per pip. This lesson shows where the two numbers in a quote come from and what that difference means in pesos.
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.
The mistake 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.