Base Currency

The base currency is the first currency listed in a currency pair in the foreign exchange (Forex) market. It is the currency you are buying or selling when you trade that pair. For example, in the EUR/USD pair, the euro (EUR) is the base currency, and the US dollar (USD) is the quote currency or counter currency. The value of the pair shows how much of the quote currency is needed to buy one unit of the base currency. So, if EUR/USD is trading at 1.1000, it means 1 euro is worth 1.10 US dollars.

In Forex trading, the base currency is important because it determines how the price is quoted and how profit or loss is calculated. When you buy a currency pair, you are buying the base currency and selling the quote currency. When you sell the pair, you are selling the base currency and buying the quote currency. Understanding which currency is the base currency helps traders read market prices correctly and place the right orders.

The base currency also affects how trade sizes and account balances are displayed. Many trading platforms use the US dollar as the base currency for account balances, but traders from other regions may choose to use their local currency. Knowing the role of the base currency is essential for managing trades, calculating exposure, and understanding how exchange rates work in the Forex market.

Browse through other terms in our Trader’s Dictionary.