What is a Currency Pair in Forex Trading? | Beginner Forex Course

  

Forex Trading Course – Lesson 2: What is a Currency Pair?

As part of the forex trading course we have started, the response to the first video was overwhelming. Based on that response, I’ve brought you the second video today.

This course begins at the complete beginner level and will go up to advanced. We’ll explain all basic and advanced terminology in simple language, so that even those who don’t know the ABCs of forex can learn and start earning online.

If you're watching this second part, make sure to watch the first part as well. I’ve provided the link to the first video in the description. In that video, I explained “What is Forex Trading” in easy terms.

To briefly summarize, in forex trading, we buy and sell different currencies and earn profit from that. That’s the basic idea — for more, check out the previous video.

Today’s Topic: What is a Currency Pair?

It’s extremely important to understand what a currency pair is. When you enter the forex market and trade currencies, you always deal with two currencies as a pair.

In simple terms, a currency pair is the quotation of two different currencies. In the forex market, when you buy one currency, you're selling another.

In the previous video, I gave the example of USD to PKR (Dollar to Pakistani Rupee), but now that we’re dealing with the forex market, we’ll be using other examples.

Let’s elaborate on how this works.

Every currency pair consists of:

• A base currency: This is the first currency in the pair — the one you are buying.
• A quote currency (or counter currency): This is the second currency — the one you are selling.

Let’s take an example: EUR/USD.

This means Euro to US Dollar, and suppose the current market price is 1.1230.

In this pair:

• Euro (EUR) is the base currency (the one you are buying).
• US Dollar (USD) is the quote currency (the one you are selling).

Let’s break it down further:

This means that 1 Euro = 1.1230 US Dollars.

To make it even simpler, let’s imagine a scenario using a fruit analogy — like how we were taught in preschool.

Suppose:

• You want to buy 1 apple (the apple represents 1 Euro, your base currency).
• To buy it, you need to pay 1.1230 US Dollars (your quote currency).

So:

1 Apple = 1.1230 USD
Which means: To buy 1 Euro, you’ll need to spend 1.1230 USD.

The base currency is what you buy, and the quote currency is what you sell (or spend).

Summary: Understanding Currency Pairs

Now you understand how a currency pair works. It consists of:

• A base currency (which you buy)
• A quote currency (which you sell to buy the base)

I’m sure nobody has explained this to you in such simple, child-friendly terms before. If you understood this clearly, make sure to leave a comment — that’s how I’ll know that you’re following along and learning.

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