Terms like base currency and quoted currency make the currency market a vast and complicated system to fathom. Many new investors strive to have their way in the market and understand its ins and outs, but it takes time to understand the market entirely.
Therefore, if you’re looking to get your foot in the door of the currency market, it would be best to start learning the technical terms in the field. If you’re looking to understand what base currency and quoted currency are, then you came to the right place.
That said, let’s get started!
Base currency is the first currency in a currency pair, while the quote currency is the second in the pair. The base currency is also known as the “transaction” currency because it is quoted relative to another so-called base currency.
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For example, if you are trading Euros and British Pounds (EUR/GBP), your base currency would be Euros and your quote currency would be British Pounds. If you were trading the Japanese Yen against US Dollars (JPY/USD), your base currency would be the Japanese Yen and your quote currency would be US Dollars.
The base currency is the “measure” of your position, so if you are long EUR/USD (EUR as a base), you have a position worth $x multiplied by how many Euros per US Dollar.
If it’s shorted, that same number would be divided across US Dollars and not Euros because each Euro isn’t worth more than a dollar.
This example of shorting EUR/USD (EUR as the base) would be -$x multiplied by how many Euros per US Dollar.
The best way to think about this is that your quoted currency, however you are trading, is always the “measure” of the position, and your base currency is how much of that measure it’s worth.
Forex is a global market where buyers and sellers trade one currency for another. Since it has no boundaries or limits, people worldwide trade in forex every day to make money off of fluctuating currencies. But what exactly are these currencies? How do they work together when trading online?
Although there are many different currencies to choose from in the forex market, most people stick with these seven:
It is the main currency used in forex. Most countries have their own currency, but they also use USD for trade between other nations. The US Dollar is the base currency in most situations because it has a stable value compared to other currencies, and it remains relatively consistent over time.
The European Union uses Euros as its primary form of legal tender — all members of the EU use Euros. Although forex traders can use other currencies for trading, EUR is one of the most popular and easily accessible options.
The United Kingdom has its currency: The British Pound sterling (GBP). It used to be the main form of legal tender within Europe until the Euro replaced it. GBP is still a primary currency, and it’s used by forex traders worldwide to make trades with other nations’ currencies.
The Canadian Dollar is the official currency of Canada. CAD is still a significant player in international markets, although it’s not as popular or readily accessible to forex traders.
The Australian Dollar is the official currency of Australia. It’s also known as “Aussie” in slang terms, and it has a long history dating back to colonial times when British colonies established trade with one another.
The Japanese Yen is another commonly traded currency in the world. Traders still use it because of its high liquidity and stability. The Yen has a low inflation rate compared to other currencies, which means that its value remains relatively consistent over time.
With a relatively low inflation rate, Norway’s economy has one of the best trade rates for exports and imports. The Norwegian Krone is one of the most traded currencies in the world. This means that traders have historically used NOK to exchange between different currencies when trading with other nations’ goods or services.
These particular currencies account for about 65% of all foreign exchange transactions globally. If you’re looking to have a profitable trade in currencies, you can always count on these currencies for reliable and optimal trade.
There are several ways to trade on forex markets. However, before you begin trading, you must know how to do so safely. In the early days of forex trading, traders had no choice but to rely on “traditional” brokers that were neither safe nor reliable for their trades.
This has changed since the introduction of regulated online platforms where people can now trade safely and reliably.
If you are interested in trading on forex markets, you must know how to do so with minimal risk. If this sounds like something for you, check out the following tips:
It’s always better to start slow than to rush into things. You can increase your trades as you get more comfortable with the trading process.
You can use point and figure charts to follow price movements. These may be easier for beginners since it is not necessary to know when a given currency pair is traded or how long it’s been around.
It is essential to find a broker with low commission rates since this will help you keep your costs down, which means greater profits. Make sure that any potential brokers have an easy way to contact them, and don’t be afraid to ask questions.
It’s crucial to remember that you can’t put all of your eggs in one basket. That is why you need to diversify and trade several currency pairs rather than concentrate on a few.
It’s essential to keep detailed records of your trades. This will help you when the time comes to complete tax returns and formulate the best strategies that match your trading style.
It is highly beneficial to write down what happened during each trade. If there were conditions that affected the results, they could be noted and considered in the future.
Even if you might think that something is unimportant, it’s better to note everything down, so there are no surprises in the future.
Since forex trading is a sensitive topic, you need a reliable forex company to work with. KnightsbridgeFX is a forex broker that offers some of the best currency rates on the market while providing you with excellent customer support.
At KnightsbridgeFX, we boast of our excellent online currency brokerage services that help you trade forex markets easily and safely. You can open an account today and start exchanging money with us at pocket-friendly and favourable industry rates.
We provide you with the best trading conditions and the lowest industry spreads, as well as a secure online forex platform that enables you to trade 24 hours a day from anywhere in the world. Contact us to take advantage of our consistent bank-beating rates.
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