Quoted Price

Understanding how prices move is not enough. Traders should also know various trading terms and definitions. Otherwise, it’ll be hard to deepen your sense of the market. Today, let’s talk about the meaning and usage of a quoted price.

What is a quoted price?

A quoted price (or quoted cost) is the current market price of a currency pair, stock, or commodity. It is the price at which buyers and sellers agree to trade the asset at a specific moment. Traders find this price on trading platforms and financial news websites. While there are several great use cases for the quoted price, they don’t tell us everything about the market, the supply and demand levels, current trading activity, and the existence of Take Profits and Stop Losses.

How does a quoted price work?

It simply reflects the current market price of an asset based on the last trade made. When a trader wants to buy or sell an asset, they can view the quoted price on a trading platform and decide if it’s the right time to make a trade.

The bid and ask prices determine the quoted price, representing the highest price a buyer is willing to pay and the lowest price a seller is willing to accept, respectively.

Quoted, bid, and ask prices

Quoted, bid, and ask prices are close concepts in trading with few differences. As we mentioned in the previous paragraph, the bid and ask prices are the intentions of buyers and sellers. On the other hand, the price quote is the current market price of an asset. We can also call it the most recent sale price.

Traders can use any price they want to make a decision. Usually, quoted rates are more straightforward to comprehend because they are one price vs. two prices in Bid and Ask. However, the Bid and Ask prices form a spread, which is extremely important for all traders.

How do traders work with quoted prices?

Traders use quoted prices to get the latest price. That’s pretty much — the quoted price gives us information about the last trade. However, all traders use quoted prices in their trading strategies and price action system, making decisions based on the assumption that the price will rise or fall.

Traders rely on the quoted price because it’s one of the few ways to get the latest market data.

What doesn’t the quoted price tell us?

While the quoted price provides valuable information for traders, it does not tell us everything about the market. For example:

• Relative levels of supply and demand for an asset.

• Who are the current buyers and sellers?

• Whether there are significant limit price orders or stop orders to buy or sell near the quoted price.

• The overall market sentiment or investor sentiment towards the asset.

• The impact of economic events or news releases on the asset’s price.

So, traders will unlikely implement any price action strategy based solely on the quoted price.

Who are the current buyers and sellers?

If there are more buyers than sellers for a particular asset, it could indicate that the asset’s price is likely to increase in the short term and vice versa.

However, the quoted price does not provide information about the identity or intentions of the current buyers and sellers. Traders may need to use additional tools, such as order book data or news sources, to gain insight into who is buying and selling an asset at a given time. That’s the biggest limitation of the quoted price.

Conclusion

Quoted prices provide valuable information for traders but also have limitations. Here are some pros and cons of using quoted prices:

Pros:

• Provide current market prices for assets

• Traders can access it easily through trading platforms or financial news sources

Cons:

• Do not provide information about the identity or intentions of current buyers and sellers.

• Do not reflect the impact of economic events or news releases on the asset’s price.

Traders should know these limitations when using quoted prices to inform their trading strategies. The quoted price is available on every trading account FBS has.