One currency priced in another's name:a pair is always a two-sided game.
Two currencies quoted against each other, such as EUR/USD.
The first is the base currency, the second is the quote currency. The rate shows how much quote currency is needed to buy one unit of the base.
In plain words
A currency has no price on its own, only against another currency, so currencies are always quoted in pairs. In EUR/USD at 1.1000, one euro costs 1.10 US dollars: the first currency is the one being priced, and the second is what it is priced in. Every trade in a pair buys one currency and sells the other at the same time.
See it move
EUR rises against USD: the pair’s price goes up
Why it matters
Reading the pair the right way round tells a trader what a rising or a falling quote means, and which currency the profit or loss is counted in.
Worked example
An example only. The figures are round and invented for the arithmetic: they are not market prices.
A trader buys 10,000 EUR/USD at 1.1000 and the rate rises to 1.1050 (invented figures).
- 1Bought 10,000 euros, sold 10,000 × 1.1000 = 11,000 US dollars
- 2At 1.1050 the euros are worth 10,000 × 1.1050 = 11,050 US dollars
- 311,050 − 11,000 = 50 US dollars
A rise of 50 pips on 10,000 euros is a gain of 50 US dollars, counted in the quote currency.
A common mistake
Buying EUR/USD is sometimes thought of as buying a single thing. It is two actions at once, buying euros and selling dollars, so the outcome depends on both currencies.
Check yourself
Learn more
- Academy lessonIntroduction to forex tradingWhat the foreign exchange market is, how currency pairs are quoted, when the four sessions trade and what a newcomer should learn first.
- Academy lessonUnderstanding currency pairsBase and quote currencies, bid and ask, the spread, and the difference between major, minor and exotic pairs.
Educational information, not investment advice or a recommendation to trade.