How Do I Trade Currency Pairs Explained - Currency Pairs Exchange Rate Example Explained

To learn how to trade currency pairs we shall use the EURUSD currency pair to explain how to trade currency pairs.

To trade a forex currency pair there is the base currency and the quote currency. The base currency and the quote currency are explained below using the EURUSD example:

Example of How to Trade EURUSD Currency Pair - Base Currency and Quote Currency

EURUSD currency pair is one of the major currency pair in the market, therefore we shall use this EURUSD forex pair for our example:

EURUSD

• Base Currency - EUR

Base Currency is the first currency in a currency pair (EUR). The Base currency is equivalent to 1 unit of the first currency.

• Quote Currency - USD

Quote Currency is the second currency in a currency pair (USD). The Quote currency shows the value of the base currency in relation to the second currency.

EURUSD Exchange Rate Explained

If EURUSD currency exchange rate quote = 1.2000

It means the ratio of EUR : USD = 1 : 1.2000

Therefore it means 1 Euro = 1.2000 US dollars

Example of currency exchange rates on MT4 Software

How Do I Trade Currency Pairs Explained - Currency Pairs Exchange Rate Explained

EURUSD - Currency Pair

In this case The EUR is the base currency and USD is the quote currency.

The base currency is always 1 unit, & the exchange rate quote is in terms of the quote currency.

Therefore, if exchange rate of EURUSD currency pair = 1.20000, it means 1 Euro is equal to 1.2 US dollars. So for each 1 Euro you have, you can buy 1.2 dollars.