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A currency pair is, literally, a ‘pair’ of two currencies.

When you place any trade on the forex (foreign exchange) market, you do so as part of a currency pair, by speculating on the value of one currency against the other.

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You’ll probably have seen currency pairs before. They look like this:

The order of the currencies isn’t random:

  • The first currency is known as the ‘base’ currency
  • The second currency in the pair is known as the ‘quote’ currency

When you place a forex trade, you are always trading the price of the base currency against the quote currency.

So, if your pair is EUR/USD, you’re trading the value of the Euro against the US Dollar.

If your pair is USD/GBP, you’re trading the value of the US Dollar against the Euro.

And so on.

If you place a ‘long’ trade on the EUR/USD, then if the Euro increases in value against the US dollar, you will profit. If it decreases in value, you will lose money.

Vice versa, if you place a ‘short’ trade on the EUR/USD pair, and the Euro falls in value against the US dollar, you’ll profit. If it increases in value against the US Dollar, you’ll lose money.

What are the most traded currency pairs?

what is currency pairs

According to data from BIS Triennial Central Bank Survey, the most three most popular currency pairs are:

  1. EUR/USD – Euro/US Dollar
  2. USD/JPY – US Dollar/Japanese Yen
  3. GBP/USD – British Pound/US Dollar

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