Some other articles
- Show all articles ( 4 ) Collapse Articles
- Show all articles ( 27 ) Collapse Articles
- Show all articles ( 15 ) Collapse Articles
- Show all articles ( 29 ) Collapse Articles
- Show all articles ( 2 ) Collapse Articles
Currencies differ from other assets because they are traded in pairs. When you trade shares or gold, you buy or sell with money. With forex, you trade one currency against another currency: you buy one currency and sell the other. Therefore you are trading two currencies, or a currency pair, simultaneously.
Currency pairs are made up of the first currency – the base currency – and the second currency – the term (or counter/quote) currency.
The first two letters in the code represent the country, and the third letter identifies the currency, such as the code CAD = Canadian Dollar.
Forex prices are known as rates, and they express the value of one currency in terms of the other.
For example, a price or rate in euro-chf could be quoted as:
EUR/CHF = 1.08867
The first currency in the currency pair is the base currency (in this example, the euro), and the second currency is the quote currency (in this example, the chf).
On our MetaTrader platforms, currency pairs are displayed on MT4 and MT5 as EURCHF
Looking at this currency rate above, we can see that 1 unit of the base currency (1 euro) is equal to 1.08867 chf, which means to buy 1 euro, you will have to pay 1.08867 chf.
If you are selling, the FX rate specifies how many units of the quote currency you get in exchange for one unit of the base currency. In the example above, the rate tells us that you will receive 1.08867 chf when you sell 1 euro.