Trading glossary
Quote currency
Trading involves risk. You could lose more than your deposit.
The quote currency is the second currency in a pair, the one a rate is counted in, so pip value and any result on the pair are denominated in it.
The currency written second in a currency pair, known equally as the counter currency or the terms currency. The rate states how many units of it one unit of the base currency costs, so it is the side being counted out. The three names describe one field in a pair's notation rather than three different things: interbank usage tends towards counter, retail platforms and textbooks towards quote, and no difference in meaning rides on the choice.
Its significance is arithmetic. Because the rate counts units of the quote currency, the value of one pip and the running result on a position are both denominated in it, before anything else happens. Where the account is held in some other currency, the platform converts that result at the prevailing rate at the moment it is realised, which introduces a second exchange rate into an outcome that was never part of the position taken. This is why a result on a pair containing neither the account currency can differ slightly from arithmetic done on the pair alone, and why the conversion rate on the day of closing matters as well as the rate on the day of opening.
The common misreading is that the quote currency is the one being sold and the base the one being bought. Both are dealt in every trade: a long position in a pair is long the base currency and short the quote currency at the same time, which is what makes an interest rate differential between the two a live part of holding it. The second is treating the order of the pair as fixed by something. It is a market habit, and the same currency is the quote currency in one pair and the base currency in another, so a rate written the other way round is the reciprocal of the first rather than a different price.
How it is calculated
The value of one pip is the contract size multiplied by the size of one pip, giving a figure denominated in the quote currency, which is then converted into the account currency at the prevailing rate.
Where the result lands on one standard lot
- Contract size, one standard lot
- 100,000 units of the base currency
- Size of one pip
- 0.0001
- Value of one pip
- 100,000 × 0.0001 = 10.00 of the quote currency
- Account held in a third currency
- The 10.00 converts at the prevailing rate when the result is realised
Illustrative arithmetic. The contract size and the pip size are conventions common to many currency pairs rather than the specification of any instrument, no rate here is a YAL price, and pairs quoted to a different number of decimal places carry a different pip size.
Where you see it
MetaTrader 5 names it Profit currency in the symbol specification, which is why the profit column on a currency pair reports in that currency before conversion.
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