Mechanics

Base and quote currency

The base currency is the first currency in a pair, and the quote currency is the second.

In a currency pair, the base currency is the currency being bought or sold, and it is always listed first. The quote currency is the currency used to express the value of the base currency, and it is listed second. For example, in EUR/USD, EUR is the base currency and USD is the quote currency, indicating how many USD are needed to buy one EUR.

For a retail trader, this distinction defines the price. A quote of 1.1200 for EUR/USD means one Euro is worth 1.1200 US Dollars. When a trader places a 'buy' order for EUR/USD, they are buying the base currency (EUR) and simultaneously selling the quote currency (USD). A 'sell' order means selling the base and buying the quote.

Taught in these lessons

Lots & leverage — Forex Foundations
The bid, the ask & the spread — Forex Foundations
Correlation between pairs — Risk & Position Sizing
Patience & the discipline of doing nothing — Psychology & Longevity
Building a routine that lasts — Psychology & Longevity