Forex Dictionary Terms

Currency Pair

Posted on

Definition – What does Currency Pair mean?

A currency pair is the standard quotation method for a forex trade. In the forex trade, you never just buy one currency or sell short another – you have to buy one currency and sell the other.

A currency pair is made up of a base currency and a quote currency, as in the USD/JPY. The first currency listed is the base currency (USD) and the next is the quote currency. The number listed after the currency pair tells you how much of one unit of the base currency will buy of the quote currency. For example, USD/JPY trading at 79.6595 means that one U.S. dollar buys 79.6595 Japanese yen.

ForexTerms explains Currency Pair

A currency pair is best thought of as a single trading unit. When you buy a currency pair – again using USD/JPY as an example – you are buying the base currency (USD) and selling the quote currency (JPY). This means that you are hoping the dollar appreciates against the yen, or, put another way, that you are long the dollar. When you sell a currency pair, you are selling the base currency (USD) and buying the quote currency (JPY). This means you are hoping the yen appreciates against the dollar, or that you are short the dollar (and long the yen).

Currency pairs can be confusing to a beginner, so it is best to try trading some pairs using one of the many free demo accounts provided online.

Other Terms

Random Articles