What are the Base and Quotation Currencies?

2023-08-07
Summary:

Understanding base and quotation currencies is essential in the forex market. Learn more about these key concepts and how they impact currency trading.

Forex trading refer to buying and selling currencies of different countries. The base currency and quoted currency are the two components used to represent currency pairs in forex trading.

Currency

When trading in the forex market, there are always two currencies involved: the currency you want to sell and the currency you want to buy.


Base Currency refers to the first currency in a currency pair, also known as the trading currency or primary currency. It is the currency used by traders to purchase or sell the quoted currency. The base currency is usually a relatively stable and highly liquid currency, such as the US dollar, euro, pound sterling, etc. In forex quotations, the base currency is usually located in front of the currency pair; for example, EUR in EUR/USD is the base currency.


Quote Currency refers to the second currency in a currency pair, also known as the pricing currency or secondary currency. It is the currency used by traders to price and exchange. The value of the quoted currency is determined based on the base currency. The quoted currency is usually a relatively unstable and illiquid currency, such as the Japanese yen, Australian dollar, Canadian dollar, etc. In forex quotations, the quoted currency is usually located after the currency pair; for example, the USD in EUR/USD is the quoted currency.


When trading currency pairs, the displayed exchange rate reflects the price of buying or selling a unit of the base currency in the selling or buying quotation currency.


If you short a currency pair, then you sell the base currency, and the currency you buy is the quoted currency. When trading long, you sell the quoted currency to buy the base currency.


For example, in EUR/USD, USD is the quoted currency, while EUR is the base currency. If the price of the currency pair is 1.1200, it means you need to purchase 1 euro for $1.12.


If the base currency appreciates or the quoted currency depreciates, the number of US dollars required to purchase one euro will increase. If the base currency depreciates or the quoted currency appreciates, the opposite effect will occur.


The choice of base currency and quotation currency is very important for forex traders. Traders make decisions to buy or sell a certain currency based on market analysis and predictions. They need to understand the exchange rate fluctuations between the base currency and the quoted currency in order to make informed trading decisions.


Each currency pair has its own characteristics, and the fundamental and technical analysis that traders must perform may vary depending on the currency pair being traded.


Generally speaking, as a leading global currency, the US dollar plays the role of a base currency, especially in the case of exotic currency pairs. However, there are also some currency pairs quoted in US dollars, such as EUR/USD and GBP/USD.


Disclaimer: Investment involves risk. The content of this article is not an investment advice and does not constitute any offer or solicitation to offer or recommendation of any investment product.

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Disclaimer: EBC Financial Group explicitly does not participate in any cryptocurrency activities or offer Crypto Contracts for Difference (CFDs). Our financial services solely pertain to traditional instruments. Clients are advised that any references to crypto-related services using the EBC name are inaccurate and unauthorized. Any reference to past performance is not indicative of future performance. The information contained in this website is provided for reference only and does not constitute any investment advice.
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Compliance Disclosure：The website can be accessed globally and is not specific to any entity. Your actual rights and obligations will be determined based on the entity and jurisdiction that you choose to be regulated.There may be local laws and regulations which prohibit or limit your rights to access, download, distribute, disseminate, share or otherwise use any or all of the documents and information published on this website.
Risk Warning: Trading Contracts for Difference (CFDs) are complex financial instruments and come with a high risk of losing money rapidly due to leverage. Trade on margin carries a high level of risk and may not be suitable for all investors. Before deciding to trade Forex and CFDs, you should carefully consider your trading objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial trading capital. We recommend that you seek independent advice and ensure you fully understand the risks involved before making any investment decision. Please read the relevant risk disclosure statements carefully before trading.
EBC Financial Group is a co-brand shared by a group of entities including:
EBC Financial Group (SVG) LLC is authorized by the St.Vincent and the Grenadines Financial Services Authority(SVGFSA),and the company registration number is 353 LLC 2020. with registered address at Euro House, Richmond Hill Road, Kingstown, VC0100, St. Vincent and the Grenadines.
Other Relevant Entities
EBC Financial Group (UK) Limited is authorised and regulated by the Financial Conduct Authority. Reference Number: 927552. Website: www.ebcfin.co.uk
EBC Financial Group (Australia) Pty Ltd (ACN: 619 073 237) is authorised and regulated by the Australian Securities and Investments Commission (Number: 500991). EBC Financial Group (Australia) Pty Ltd is a related entity of EBC Financial Group (SVG) LLC. The two entities are managed separately. The financial products and services offered on this website are NOT provided by the Australian entity and no recourse against the Australian entity is available.
EBC Financial Group (Cayman) Limited is licensed and regulated by the Cayman Islands Monetary Authority (Number: 2038223). Website: www.ebcgroup.ky
Business Address: The Leadenhall Building, 122 Leadenhall Street, London, United Kingdom, EC3V 4AB. Email Address : [email protected]. Telephone : +44 20 3376 9662
Disclaimer: EBC Financial Group explicitly does not participate in any cryptocurrency activities or offer Crypto Contracts for Difference (CFDs). Our financial services solely pertain to traditional instruments. Clients are advised that any references to crypto-related services using the EBC name are inaccurate and unauthorized. Any reference to past performance is not indicative of future performance. The information contained in this website is provided for reference only and does not constitute any investment advice.
Regional Restrictions: EBC does not offer any services to citizens and residents of certain jurisdictions including: Afghanistan, Belarus, Burma (Myanmar), Canada, Central African Republic, Congo, Cuba, Democratic Republic of the Congo, Eritrea, Haiti, Iran, Iraq, Lebanon, Libya, Malaysia, Mali, North Korea (Democratic People's Republic of Korea), Russia, Somalia, Sudan, South Sudan, Syria, Ukraine (including Crimea, Donetsk, and Luhansk Regions), the United States, Venezuela, and Yemen. For more information, please check out our FAQs.
Compliance Disclosure：The website can be accessed globally and is not specific to any entity. Your actual rights and obligations will be determined based on the entity and jurisdiction that you choose to be regulated.There may be local laws and regulations which prohibit or limit your rights to access, download, distribute, disseminate, share or otherwise use any or all of the documents and information published on this website.
Risk Warning: Trading Contracts for Difference (CFDs) are complex financial instruments and come with a high risk of losing money rapidly due to leverage. Trade on margin carries a high level of risk and may not be suitable for all investors. Before deciding to trade Forex and CFDs, you should carefully consider your trading objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial trading capital. We recommend that you seek independent advice and ensure you fully understand the risks involved before making any investment decision. Please read the relevant risk disclosure statements carefully before trading.
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