The first currency in a currency pair (the one on the left side from the slash “/ “) is called Base Currency. Base currency always has a value of 1. The second currency in the currency pair (the one on the right side from the slash “/”) is called counter currency or Quote Currency.
For example: EUR/USD
· EUR – base currency with value of 1.
· USD – quote (or counter) currency
Think of the base currency as the “root”. When you buy, for example EUR/USD, it means that you are buying the base currency (EUR) and simultaneously selling the quote currency (USD).
USDJPY, USDCHF, USDCAD, EURUSD, GBPUSD, AUDUSD, NZDUSD constitute a group of so-called “Majors” – they are united by the fact that one of the currencies in the pair is always the US dollar. This is the most highly liquid financial instruments that have a significant volatility and capacity to fluctuate substantially and, therefore, they carry a nearly inexhaustible potential for profit.
There are also other groups of instruments. If, for example, the base currency is the Australian dollar, and the quote currency is the Canadian dollar, this is AUDCAD cross-rate. The so-called cross-rates are divided into “major crosses” and “minor crosses” according to their liquidity in the financial markets.
Besides the fact that there are various groups of financial instruments, we can mention that some currencies can often play one or another typical role. In particular, the currencies of the most stable countries, as well as contracts for precious metals (USDCHF, USDJPY, XAUUSD, XAGUSD) can play the role of financial instruments, investments in which can help you safely ride out times of crisis on the markets. In trader’s jargon, such instruments are called “safe haven” (ref. “safe haven”). The currencies of those countries in whose export system raw materials prevail are often called commodity currencies (e.g.: USDCAD, AUDUSD).
