The traded currencies in Forex market have a specific pricing structure, that are known as currency pairs. Usually the currency value is verified through comparing it with another currency. “Base” is used for the first currency, whereas “quote” is used for the second currency. Currency pair is used to check what should be the value of quote currency to buy base currency’s one unit.
In Forex trading, it is common to purchase a new currency and sell the previous. In Forex trading, currency pair is considered as single unit that can be either purchased or sold. Whenever a trader decides to get base currency, he has to sell the quote currency. The “bid” shows the amount of quote currency for purchasing base currency’s one unit. On the other hand, when a currency pair is being sold, the trader decides to sell the base currency and to buy the quote currency. Asking or selling price shows the amount of quote currency for trading single base currency unit.
For Instance: if the currency pair USD/EUR is quoted USD/EUR=1.5. The trader has to buy the pair 1 US dollar for 1.5 EUR. In case that he sells a currency pair, he gets 1.5 EUR for each and every US dollar that he sells. The opposite of currency quote is EUR/USD, therefore the equivalent price will be EUR/USD = 0.667. It shows that 0.667 US dollar is used to purchase one Euro.
How to Read Currency Pairs?
In Forex market, currencies are available in form of pair. The trader gets more opportunities in Forex than in any other trade form. For instance, a trader is bullish on Euro and decides to purchase Euro. Forex market gives permission to select whatever you want for purchasing Euro. A trader can select USD, or he can opt for JPY or any other currency to make a pair with Euro. There is a long list of choices to select for purchasing Euro. As a result, the currency will be shown like that: EUR/USD.
The first currency is submitted as “base currency”. The other currency is measured as “counter currency”. As a result, EUR/USD has Euro as base currency, whereas counter currency is US dollar. In case, the value 1.4700 is used to trade this pair, the quote will demonstrate the amount of counter currency to get base currency’s one unit. In other words, the value 1.47 dollars will be used to buy one single Euro.