Free Trading School · Level 3: Forex Essentials
How currency pairs work
In forex you always trade one currency against another, so prices come in pairs such as EUR/USD. The first currency is the base, the second is the quote. The price tells you how much of the quote currency one unit of the base costs.
EUR/USD = 1.0850 means one euro costs 1.0850 US dollars. If you buy EUR/USD you are buying euros and selling dollars, betting the euro will strengthen. If you sell it, you are betting the euro will weaken against the dollar.
| Group | Examples | Traits |
|---|---|---|
| Majors | EUR/USD, USD/JPY, GBP/USD, USD/CAD, AUD/USD, USD/CHF, NZD/USD | Always include USD; tightest spreads |
| Minors (crosses) | EUR/GBP, EUR/JPY, GBP/JPY, AUD/CAD | No USD; slightly wider spreads |
| Exotics | USD/TRY, USD/MXN, EUR/ZAR | Wide spreads, sudden moves; not for beginners |
Currencies move on interest rates, inflation, economic growth and risk sentiment. The Canadian dollar, for example, often follows oil prices because Canada is a major oil exporter.
Buying a pair = buying the base currency. Start with the majors: they have the lowest costs and the most information available.
Quick answers
In forex you always trade one currency against another, so prices come in pairs such as EUR/USD. The first currency is the base, the second is the quote. The price tells you how much of the quote currency one unit of the base costs.
Buying a pair = buying the base currency. Start with the majors: they have the lowest costs and the most information available.
EUR. The first currency in the pair is the base.
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