As we all know that in Forex one currency is traded against the other. So, the currency trading is done in pairs. And these pairs consist of two currencies one is Base currency and the other is Quote currency which are defined below.
Base currency:
Base currency has two properties
- Base currency is the first currency which is quoted in the currency pair
- It is always quoted as one against the quoted currency
For example: if 1EUR/USD is quoted as 1.5020/1.5023 it means that you can either buy one Euro by paying 1.5023 or you will receive 1.5020 for each Euro you sell.
Quoted Currency:
Quoted currency has two properties
- Quoted currency is the second currency which is quoted in the Forex currency pair
- It is always having two prices which are fluctuating at the currency market price; which are Ask Price and Bid Price.
For example: 1Eur/USD quoted as 1.2350/1.2353. These two prices (bid and ask) are of the quoted currency for one unit of base currency.
Significance of Base currency and Quoted Currency while trading:
Now you are familiar with Base currency and quoted Currency in Forex market. Now the question is; how this information will help you while trading? Simple is the answer, Always remember that all the deals you make or you can say the orders of selling or buying a currency you place in the market, it is the base currency which is taken in account. For example if you place a buy order on a currency pair EUR/USD it means that you are buying EUR (Euro), similarly if you place a sell order on EUR/USD simply means that you are selling Euro. And in both the cases EUR is the base currency. Don’t bother about the orders for quoted currency; an opposite order is automatically placed by your broker, which you need not to consider.
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