What is a currency pair?

A currency pair refers to the two currencies are involved in a trade. For example, if you want to buy the Japanese Yen using U.S. Dollars, to be in the quoted price for the USD / JPY currency pair (U.S. $ = U.S. dollar, JPY = Japanese Yen).

Basically, the currency pair that you should look at depends on the currencies you want to trade in.

What Is a Base Currency?

A base currency is the currency that was first mentioned in a currency pair. In USD / JPY, eg currency pair, the base currency is USD. In EUR / USD currency pair (EUR = Euro), the EUR is the base currency.

The base currency is the currency with respect to the quoted price. For example, the rate USD / JPY 110.00 means that one unit of base currency (ie USD) is worth 110.00 yen.

To clarify, here’s another example: EUR / USD 1.4600.

This means that 1 unit of euro is worth 1.4600 units of U.S. dollars. To buy 1 euro, you’ll need to trade $ 1.4600 (ie sell USD 1.4600).

What Åre Bid and Ask Prices?

The base currency is sold at different prices at 2 at any time, depending on whether you want to buy or sell. For example, to sell the USD / JPY currency pair (ie, sell and buy the JPY USD), will receive 110.00 Japanese Yen. However, if you want to buy the USD / JPY pair, you may have to pay 110.03 Japanese yen.

Notice how the purchase price is higher than the selling price. The difference between buying and selling is known as the “spread.” If you first buy a currency pair and then sell it immediately, you incur a loss equal to the spread.

The spread is what you pay your agent and transaction fees.