Two currencies quoted as one:buy the first, and the second is spun.
Short for currency pair: two currencies quoted together showing their relative value.
The first currency is the base and the second is the quote, e.g. EUR/USD.
In plain words
Currencies are always priced against one another, so they trade in pairs. In EUR/USD the first currency, the euro, is the base and the second, the dollar, is the quote: the price says how many units of the quote currency one unit of the base costs.
See it move
Base rises against Quote: the pair’s price goes up
Why it matters
Buying a pair means buying the base and selling the quote; selling the pair does the reverse. Profit and loss on a pair arise first in the quote currency and are then converted to the account’s currency if that is different.
Worked example
An example only. The figures are round and invented for the arithmetic: they are not market prices.
EUR/USD is quoted at 1.2000 and a trader exchanges 1,000 euros.
- 1One euro costs 1.2000 dollars
- 21,000 euros × 1.2000 = 1,200 dollars
- 3Going the other way1,200 dollars ÷ 1.2000 = 1,000 euros
At a price of 1.2000, 1,000 euros and 1,200 dollars are the same amount of money.
A common mistake
A rising pair does not mean that both currencies are strong. If EUR/USD rises, the euro has gained against the dollar, which is the same as the dollar losing against the euro.
Check yourself
Educational information, not investment advice or a recommendation to trade.