What are the base currency and quote currency?
existforeign exchange marketWhen trading online, there are always two currencies involved: the currency you want to sell and the currency you want to buy.
The first currency in each currency pair is called the "base currency" and the second currency is called the "quote currency". When trading a currency pair, the displayed exchange rate reflects the price of buying/selling a unit of the base currency by selling/buying the quote currency.
If you short a currency pair, you are selling the base currency and buying the quote currency. When you go long, you are selling the quote currency to buy the base currency.
For example, in EUR/USD, USD is the quote currency, while EUR is the base currency. If the price of the pair is 1.1200, it means that you need to pay 1.12 USD to buy 1 Euro.
If the base currency appreciates or the quoted currency depreciates, the amount of dollars required to buy one euro will increase. If the base currency depreciates or the quoted currency appreciates, the opposite effect occurs.
Understanding the quotes of currency pairs is very important in foreign exchange trading. Each currency pair has its own characteristics, and the fundamental and technical analysis that traders must perform will also vary depending on the currency pair being traded.
In general, the US dollar, as a leading global currency, plays the role of the base currency, especially in exotic currency pairs. However, there are also some currency pairs quoted in the US dollar, such as EUR/USD and GBP/USD.
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Disclaimer: The content of this article does not represent the views of the Institute of Foreign Exchange. The content is for reference only and does not constitute investment advice. Investors operate accordingly at their own risk.