Base and Quote Currency
When people trade Forex, they use currencies as trading assets. A currency pair is a combination of two different currencies:
Base currency means the first one in a pair
Quote currency meaning, it’s the second currency in the pair.
In general, the currencies are identified by the three-letter codes such as USD (US Dollar), GBP (Great Britain Pound), etc, and their pairs use a slash between the currencies (GBP/USD).
Forex trading always involves selling one currency in order to buy another, which is why it is quoted in pairs – the price of a forex pair is how much one unit of the base currency is worth in the quote currency.
Each currency in the pair is listed as a three-letter code, which tends to be formed of two letters that stand for the region, and one standing for the currency itself. For example, GBP/USD is a currency pair that involves buying the Great British pound and selling the US dollar.
So in the example below, GBP is the base currency and USD is the quote currency. If GBP/USD is trading at 1.35361, then one pound is worth 1.35361 dollars.
If the pound rises against the dollar, then a single pound will be worth more dollars and the pair’s price will increase. If it drops, the pair’s price will decrease. So if you think that the base currency in a pair is likely to strengthen against the quote currency, you can buy the pair (going long). If you think it will weaken, you can sell the pair (going short).