Foreign exchange or forex trading can be quite profitable for both short-term and long periods and can help you become financially independent. However, it can involve a lot of technical knowledge and concepts that you need to learn before you even start.
While an initial forex trading course can help you with that, you need to put in additional time on your own to understand basic forex terms like base currency and quote currency. Let’s dive into the definitions of these basic forex trading terms to understand the difference between them.
Read ahead to also learn how you can understand these terms in-depth.
What is base currency?
Most often, the unit prices of different currencies in a specific forex market are quoted in pairs. The base currency refers to the value of the first currency in a particular currency pair quotation.
A base currency of a currency pair is also referred to as the transaction currency. For most terms and purposes, trading firms use the base currency as the domestic currency.
What is quote currency?
The quote currency is the value of the second currency involved in a currency pair. This term is used to denote the amount of money you need to shell in the second currency to purchase one unit of the base currency.
Quite currency is also popularly known as the counter currency. Let’s understand the concept of quote currency through an instance.
Take the currency pair GBP/USD for example. This currency pair involves the British Pound Sterling (GBP) and the US Dollar (USD). In this case, GBP is the base currency and USD is the quote currency.
Why should you learn more about currency pairs?
Currency pairs have been designed to make it easier for forex traders to buy and sell specific currencies. They also allow them to navigate international forex markets more efficiently.
Forex rates are also mentioned in currency pairs to help investors simultaneously buy and sell currencies. For example, a trader dealing with currency pairs of GBP/USD and USD/INR will be able to manipulate the rise and fall of the value of USD to their advantage.
Learning more about currency pairs can help you learn insider trading knowledge like which pairs are more lucrative and whose value can be predicted to go down. This can help you make profitable deals and earn more money.
How can you learn about currency pairs and other forex trading basics?
Forex trading concepts like currency pairs aren’t a piece of cake to comprehend and implement in trading strategies, especially if you are a novice. Even if you know the meanings of common trading terms, you will still need a lot of contextual knowledge in order to be a good trader.
The easiest way to learn about forex trading basics is to enrol in an appropriate forex trading programme. Such a course will show you the tropes of the game and give you enough mock experience.
Start your search for appropriate forex trading courses today!