Base currency
The first currency in a pair. It is the one you are buying or selling, and the price is always for one unit of it.
In EUR/USD the euro is the base currency. It always counts as exactly 1, and the price tells you how many units of the quote currency it takes to buy that one euro.
When you go long (buy) a pair, you are buying the base and selling the quote. When you go short (sell), you dump the base and grab the quote. So the whole trade is really a bet on the base currency's muscle against the other one.
Who is the base?
- EUR/USD = 1.0850: base is EUR, 1 euro = 1.0850 dollars.
- USD/JPY = 150.20: base is USD, 1 dollar = 150.20 yen.
Bottom line: The base is always on the left, and it is always the "one" in the sentence "one of these costs that many of those".
Mixing up which currency you are actually backing. On USD/JPY, buying means backing the dollar, not the yen.
Keep this word for good
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