Trading Academy

Lesson 7

What is the Base Currency and the Quote Currency?

Reading Forex quotes is very easy once you get the hang of it, because it only has two components: the base currency and the counter or quote currency.  When the base currency is USD, think of the quote as telling you the value of it in that other currency.

The currency to the left of the slash is known as “the base currency” while the currency on the right is termed the quote or counter currency. The base currency always has a value of 1. 

In the example above, the GBP (Great Britain pound) is the base currency while the U.S. dollar is the counter currency. So the quote would be read as: 1 pound is equivalent to 1.5686 U.S. dollars.

 In other words, if you want to purchase one Great Britain pound, you would have to pay 1.5686 U.S. dollars for it. If, however, you would want to sell one unit of the base currency, you would receive 1.5685 U.S. dollars for it.

The position of a currency in the quote is strictly determined and standard. For the pair Euro and U.S. Dollar it is EUR/USD and never USD/EUR.

When a currency quote does not include the U.S. dollar as one of its components, this is called a cross currency. The most popular cross currencies among traders are the EUR/GBP, EUR/CHF and EUR/JPY.

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