Currency pairs explained
Identify base and quote currencies in any forex pair.
Lesson path
Market Foundations + Forex Mechanics
The Basics
Pass the check before saving this lesson.
Pass the check to unlock nextOpen track mapChange starting pointToday's tiny win: make one idea click.
Identify base and quote currencies in any forex pair.
Every pair is a comparison
Forex means foreign exchange: trading one currency against another. The pair name tells you the comparison. In EUR/USD, EUR is the base currency, which means it is the thing being priced. USD is the quote currency, which means it is the currency used to state the price. EUR/USD at 1.0850 means 1 euro costs 1.0850 U.S. dollars.
Buying EUR/USD means you are betting the euro strengthens against the dollar. Selling EUR/USD means you are betting the euro weakens against the dollar. You are never trading a currency in isolation. You are always trading a relationship.
Pairs come in categories. Majors include the U.S. dollar, like EUR/USD, GBP/USD, USD/JPY, USD/CHF, AUD/USD, NZD/USD, and USD/CAD. They usually have the tightest spreads. Crosses do not include USD, like EUR/GBP or GBP/JPY. Exotics pair a major currency with an emerging-market currency, like USD/ZAR or USD/TRY, and tend to have wider spreads and sharper movement. Gold works the same way in XAUUSD: XAU is gold, USD is the dollar. BTC/USD uses the same base-and-quote logic.
Recap: first currency is base, second currency is quote. The price tells you how much quote currency it takes to buy one unit of the base currency.
Knowledge check
Answer before moving on.
1. If EUR/USD is quoted at 1.0850, what does that mean?
2. What are you betting if you buy EUR/USD?
3. Which pair is a cross rather than a major?
Pass the check before saving.
Use the knowledge check first. After you pass it, this card turns into the save-and-continue handoff.