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Currency pair definition
A currency pair is the quotation of two currencies traded against each other in the forex market. It shows how much of the quote currency you need to buy one unit of the base currency.
In every forex trade you buy one currency and sell the other at the same time, so prices are always quoted as a pair. The first currency is the base currency, and the second is the quote currency, also called the counter currency.
Currency pairs let you trade on whether the base currency will rise or fall against the quote currency. They group into major, minor, and exotic pairs, and they trade on bid and ask prices, with the spread as the gap between the two.
Currency pair Example
Take EUR/USD:
- EUR is the base currency. - USD is the quote currency.
At EUR/USD = 1.2000, one euro buys 1.2000 US dollars. Expecting the euro to rise against the dollar, you buy EUR/USD. Expecting it to fall, you sell EUR/USD.
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