When it comes to foreign exchange trading, the base currency is the currency that appears first in a currency quotation, while the quote currency (also known as the counter currency) is the second currency listed. Typically, currency quotations are presented as pairs, with the base currency listed before the quote currency.
For example, a foreign exchange quotation might be displayed as XXX/YYY, where XXX represents the base currency, and YYY represents the quote currency. In the case of the currency pair EUR/USD, the euro would be the base currency, while the US dollar would be the quote currency.
Understanding the base and quote currency is crucial for foreign exchange traders as it enables them to determine the value of one currency in relation to another. By monitoring changes in currency pair values over time, traders can make informed decisions about when to buy or sell a particular currency, based on market trends and other factors.