Reading the price
EUR/USD at 1.0850 means one euro costs 1.0850 dollars. If it rises to 1.0900, the euro has become more expensive in dollars — the base strengthened, or the quote weakened, or both. There is no way to tell which from the pair alone, which is why traders watch several pairs sharing a currency.
What you are buying and selling
Buying a pair means buying the base and selling the quote. Selling the pair is the reverse. So buying GBP/JPY is a bet that sterling gains against the yen; it is simultaneously long sterling and short yen, and it can profit from either side moving.
Why this decides your pip value
A pip is a movement in the quote currency, so its value is fixed in the quote currency and floating in everything else. On a pair quoted in dollars with a dollar account, the pip value is constant. On USD/CHF with a dollar account it is not, because a pip is worth a fixed number of francs and the franc rate moves.
Position size is measured in the base
One standard lot is 100,000 units of the base currency. A lot of EUR/USD is 100,000 euros; a lot of USD/JPY is 100,000 dollars. This is why the margin required for the same lot size differs between pairs.
In short
| Base | The first currency, the one being priced |
|---|---|
| Quote | The second currency, the one doing the pricing |
| One lot | 100,000 units of the base currency |
| Pip value | Fixed in the quote currency |
Common questions
If I buy EUR/USD, am I long or short the dollar?
Both at once, in a sense: long the euro and short the dollar. The pair only moves on the relationship between them, so a trade is always a view on one against the other, never on one alone.
Why does margin differ between pairs at the same lot size?
Because margin is a share of the position value, and position value is measured in the base currency then converted. A lot of GBP/USD is 100,000 pounds, which is worth more than 100,000 dollars, so it ties up more margin.
Does the base always come first on the chart too?
Yes. Every platform draws the price of the base in terms of the quote, so a rising line always means the base is strengthening.
Trading forex and CFDs on margin carries a high level of risk. Most retail accounts lose money. Nothing on this page is financial advice or a recommendation to trade.