What is the Base Currency in Forex?
Base Currency
Forex Trading Glossary
Quick Answer: The base currency is the first currency in a currency pair (e.g., EUR in EUR/USD). It represents what you are buying or selling, and is always valued at 1.0.
What is the Base Currency?
The base currency is the first currency listed in a pair quotation. It represents the unit being bought or sold. In EUR/USD, the euro is the base currency, while USD is the quote currency.
Why the Base Currency Matters
- Direction: Buying a pair means buying the base currency and selling the quote currency.
- Price reference: The exchange rate tells you how many units of the quote currency are needed for one base unit.
- Profit calculation: Gains and losses are calculated relative to the base currency movement.
- Exposure management: Understanding the base currency clarifies which economy you are effectively long or short.
Related Terms
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