What Are Currency Pairs? Base And Quote Currency. Examples
Base vs Quote Currency
This article explains how trading apps work and offers an approach to reading lists of trading assets. We cover the difference between base and quote currencies and give an overview of all the key currency pairs on the market.
What is a Currency Pair?
A currency pair is the quotation of the relative value of one currency against the other. In currency pairs the asset serving as reference is called the “quote currency” and currency that is being quoted is called the “base currency”. For instance, the EUR/USD currency pair has the euro as its base currency and the US dollar as its quote currency.
Currency pairs provide an insight into the amount of quote currency needed to purchase one unit of the base currency. Different currencies are identified by their ISO codes – internationally recognized unique three-letter symbols (eg. EUR for the euro, USD for the US dollar).
Understanding Currency Pairs
Fiat or national currency pairs are often traded on the international foreign exchange market known as the forex market. Open 24 hours a day during weekdays, forex allows traders to buy, sell and speculate on currencies from around the world. Crypto exchanges run 24 hours a day, 365 days a year. The TabTrader app provides access to thousands of crypto trading pairs on all the major cryptocurrency exchange platforms.
Trading is the process of buying and selling of value. Exchange platforms allow market participants to swap a particular currency in their possession for a different one.
It is possible to treat a currency pair as a single entity and apply buying and selling operations to it as a whole. For example, if a trader purchases the BTC/USD currency pair, they receive the base currency, BTC, in exchange for the quote currency, USD. Conversely, when a market participant decides to sell the BTC/USD currency pair, they obtain USD in return for a specified amount of Bitcoin.
Currency pairs are characterized by their bid and ask (offer) prices. While the bid price represents the amount of quote currency required to get one unit of the base currency, the currency pair ask price refers to the quantity of base currency necessary to buy one unit of the quote currency.
Factors that Affect Currency Pairs
A variety of factors have the potential to affect the valuations of assets in currency pairs. Here are some of them:
|Political events||A country's political state and economic stability can affect its national currency strength.||- The Trade War between the US and China influenced a variety of markets around the world. - The ongoing crisis in Venezuela has had a huge and devastating effect on the country’s economy.|
|Economic events and announcements||GDP (Gross Domestic Product) rate, central bank interest rate changes, employment rates etc. have the capacity to directly influence a national currency’s level of stability.|
|Force majeure events||Unavoidable circumstances that interrupt the expected course of events can cause economic instability even in major economies at any point in time.||- Forest fires in Turkey in summer 2021 drove higher spending by the affected municipalities. - The Covid-19 pandemic caused major economies to lose a significant percentage of their GDP.|
|Social and media factors||A certain level of hype, whether intentional or circumstantial, around a particular asset is likely to cause its price to change.||In March 2022 Tesla CEO Elon Musk published a tweet regarding his lack of intention to sell his crypto holdings which include unknown quantities of Dogecoin, Bitcoin and Ether amid a possible threat from inflation. Minutes later Dogecoin’s price reached its highest value in five days. In many cases traders are required to react to market changes instantly to be able to make a profit. The TabTrader app puts dozens of different exchanges and advanced trading functionality in the palm of your hand.|
Examples of Currency Pairs
Let’s take a closer look at some real currency pairs!
Major Currency Pairs
The term “majors” is frequently used to describe the most traded currency pairs on the market. EUR/USD (euro/US dollar), USD/JPY (US dollar/Japanese yen), GBP/USD (British pound/US dollar) and USD/CHF (US dollar/Swiss franc) trading pairs reportedly possess the highest trading volume in the forex market at the present time. Some of the major cryptocurrency pairs include: BTC/USDT (Bitcoin/US dollar Tether), ETH/USDT (Ether/US dollar Tether).
Minor and Exotic Pairs
In ‘Exotic’ or ‘minor’ currency pairs a major currency is paired with a currency from a developing market. TRY/USD (Turkish lira/US dollar) qualifies as an exotic currency pair. Cross-currency pairs are currency pairs that do not feature the US dollar. This type of currency pair may also be included in the ‘minor’ category. One example of a cross-currency pair is GBP/JPY (British pound/Japanese yen).
Just as with traditional currencies, cryptocurrencies can be traded on exchanges in pairs. Currently the best-known trading pair on the cryptocurrency market is ETH/BTC (Ether/Bitcoin). Upon introduction of stablecoins in 2010 crypto traders gained the opportunity to keep the value of their funds at a stable level without converting them to fiat. Some of the common trading pairs featuring stablecoins are: BTC/USDT (Bitcoin/US dollar Tether), ETH/USDT (Ether/US dollar Tether), and DOGE/USDT (Dogecoin/US dollar Tether). Unlike the maximum number of fiat currency pairs, the total count of cryptocurrency trading pairs is not limited by the number of existing countries. There are currently more than 18,000 actively traded cryptocurrencies on the market with new ones appearing every day.
Cryptocurrencies are traded 24/7 but tend to be far more volatile than fiat currencies. We advise using one of the TabTrader indicators available on the app to help optimize your trading experience.
Currency Pairs FAQs
Here you can find answers to the most frequently asked questions. If anything remains unclear, please tell us!
What are the major Forex currency pairs?
EUR/USD (Euro/US dollar) USD/JPY (US dollar/Japanese yen) GBP/USD (British pound/US dollar) USD/CHF ( US dollar/Swiss franc) AUD/USD (Australian dollar/US dollar) USD/CAD (US dollar/Canadian dollar)
How do currency pairs work?
When a trader buys a currency pair they agree to obtain the base currency in exchange for the quote currency. For example, if you click “Buy” on the XRP/USDT currency pair in the TabTrader app, you will be receiving Ripple tokens and selling Tether stablecoin tokens.
What are the best Forex pairs?
There is no such thing as a ‘good’ or ‘bad’ currency pair if you know your way around trading. Newcomer traders are, however, advised to initially stick to major currency pairs as their assets currently have more analytics data available.
What are the major crypto pairs?
Some of the major cryptocurrency pairs include: BTC/ETH (Bitcoin/Ether) BTC/USDT (Bitcoin/US dollar Tether) ETH/USDT (Ether/US dollar Tether) BNB/USDT (Binance Coin/US dollar Tether) LTC/USDT (Litecoin/US dollar Tether) BTC/USDC (Bitcoin/US Dollar Coin) XRP/USDT (Ripple/US dollar Tether) SOL/USDT (Solana/US dollar Tether) ADA/USDT (Cardano/US dollar Tether) You can check out the full list of cryptocurrencies traded on all the major exchanges in the TabTrader app.