For beginners and successful forex traders in south africa , the representation of the currency pairs can seem confusing at first glance. If a currency is specified on the forex market, it is always compared with a counter currency. The former currency from a pair is called the base currency. The counter currency is also known as the quoted currency. This is the representation of the currency pair consisting of the euro and the US dollar:
EUR / USD = 1.15
The base currency always has the value of one unit. If you now look at a currency pair, you can see the value of a unit of the trading online in currency represented by the value of the quoted currency. In our example:
- The rate for EUR / USD is 1.15.
- In this case, the euro is the base currency and the US dollar is the quoted currency.
- One unit of the euro is therefore worth as much as 1.15 US dollars, i.e. 1 € = 1.15 US $.
- On the other hand, if the US dollar is the base currency, the USD / EUR rate is 0.87 (1 divided by 1.15).
The abbreviations are mainly used in the presentation of the courses. You should know the most important currencies and their abbreviations:
- EUR : Euro
- USD : US dollar
- JPY : Japanese yen
- GBP : British pounds sterling
- CHF : Swiss Francs
- CAD : Canadian dollar
- AUD : Australian dollar
- NZD : New Zealand dollar
In addition, traders use nicknames for the most important currency pairs :
- GBP / USD : Cable
- USD / CHF : Swissy
- USD / CAD : Loonie
- AUD / USD : Aussie
- NZD / USD : Kiwi
The popular forex trade site in australia, most currencies are traded against the US dollar, which is why the US dollar is often the base currency. A shift from the base currency to the counter currency is easily possible; the rate is calculated inversely as in the example above. Since it is possible to go long or short when trading the forex market, it does not matter which currency is considered the base currency for a particular currency pair.
For example, if you want to buy euros and pay in US dollars, open an account at best online trading platform long position for EUR / USD. Alternatively, you could take a short position on USD / EUR, which would sell US dollars and receive euros. After closing the position, the actions are reversed again and both possibilities come to the same thing.