Understanding Quote Currency in Forex Trading

The term "quote currency" is something that you are going to need to understand if you plan on trading in the forex market. Here are the basics of quote currency.

Quote Currency

When you trade in the forex market, you are going to be dealing with currency pairs. Currency pairs are made up of two different currencies. The first currency in the pair is known as the base currency. The second currency in the pair is referred to as the quote currency. You are always going to be buying one currency and selling another in these transactions. You are going to be looking at the relationship between the base and quote currency when you are making individual investment decisions. For example, when looking at the EUR/USD pair, the Euro is the base currency, and the United States dollar is the quote currency.

Implications

If you are going to place a buy trade, you are essentially hoping that the base currency rises in value when compared to the quote currency. If you are going to place a sell trade, you are instead hoping that the quote currency increases in value while the base currency decreases in value.