Trading glossary
Base currency
Trading involves risk. You could lose more than your deposit.
The first currency named in a pair, always one single unit of it, against which the rate states how many units of the second currency that one unit costs.
The first currency written in a pair, and always one single unit of it. The rate beside the pair states how many units of the quote currency one unit of the base costs. The base never scales, so a rising rate means the base has strengthened against the quote, for every pair without exception.
Which currency takes the base position is fixed per pair by convention rather than chosen. EUR/USD is always written with the euro as the base, never the reverse, and anybody wanting the opposite reads the reciprocal. The convention follows an old order of precedence, the euro ahead of sterling, sterling ahead of the Australian and New Zealand dollars, those ahead of the US dollar, and the US dollar ahead of most others, which is why the dollar sits on the right of EUR/USD and on the left of USD/JPY.
Contract size is stated in units of the base, so a standard lot is a fixed quantity of the base currency and not of the quote. The consequence surprises people at the point a position closes: the result arrives in the quote currency, because the quote currency is what the rate counts, and it is converted again if the account is denominated in a third currency.
How it is calculated
The rate quoted beside a pair states how many units of the quote currency one single unit of the base currency costs.
Reading a rate off a pair
- Pair
- EUR/USD
- Base currency
- EUR
- Quote currency
- USD
- Rate
- 1.0850
- What the rate states
- One euro costs 1.0850 US dollars
- One standard lot
- 100,000 euro, counted in the base currency
Illustrative figures, not YAL prices or terms. Contract sizes and quoting conventions are published per instrument in its specification.
Where you see it
MetaTrader 5 lists a pair with its base currency first, and states the contract size in units of the base in the symbol specification.
Related terms
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