Second in the pair, it names the cost:the quote is what one base unit's tossed.
The second currency in a currency pair.
In EUR/USD, the US dollar is the quote currency. The exchange rate shows how much of the quote currency is needed to buy one unit of the base currency.
In plain words
A currency pair is written as two codes, such as EUR/USD. The second code is the quote currency: the price of the pair is the amount of the quote currency that one unit of the first currency, the base currency, costs.
See it move
EUR rises against USD: the pair’s price goes up
Why it matters
Profit and loss on a position first arise in the quote currency, and the value of one pip is a fixed amount of the quote currency. If the account is held in a different currency, that amount is then converted.
Worked example
An example only. The figures are round and invented for the arithmetic: they are not market prices.
EUR/USD is quoted at 1.1000 and a trader holds one standard lot, which is 100,000 euros.
- 1One euro costs 1.1000 US dollars, so 100,000 euros cost 110,000 US dollars.
- 2One pip is 0.0001, so one pip on the lot is 100,000 × 0.0001 = 10 US dollars.
- 3A rise of 20 pips to 1.1020 changes the value by 20 × 10 = 200 US dollars.
The size of the position is counted in euros, the base currency, but the gain of 200 is in US dollars, the quote currency.
A common mistake
It is easy to assume that a pip on a standard lot is always worth 10 US dollars. For a pair quoted to four decimals it is worth 10 units of the quote currency, so on EUR/GBP it is 10 pounds.
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.