Understanding Currency Pairs in Forex Trading: A Beginner's Guide

If you are planning on getting involved in the Forex market, you will need to know what a currency pair is and how it is used. Here are the basics of the currency pair and how it works.

Currency Pair

When you are trading the market, you will notice that currencies are grouped together in pairs. Every time that you place a trade in the Forex market, you are going to be dealing with a pair of currencies. You are simultaneously going to be purchasing one currency, and selling another. In order to profit from the Forex market, you are hoping that one currency is going to gain value,  when compared to the other currency in the pair.

How It Works

The first part of the currency pair is known as the base currency. The second currency in the currency pair is also known as the quote currency. Whenever you buy a pair, you are hoping that the base currency increases in value, when compared to the quote currency. Whenever you sell a pair, you are saying that you think the quote currency is going to gain value on the base currency. You will be able to profit from the fluctuations between these two pairs.