Glossary · What is forex?Quote currency
The quote currency is the second currency in a pair, the one the price is counted in. In EUR/USD it is the US dollar, so 1.10000 means one euro costs 1.10000 dollars. Pip value and profit on the pair are worked out in the quote currency first.
The quote currency, also called the counter currency, is the measuring unit of a currency pair. The buying and selling lesson explains what a trade does to each side of the pair.
What the quote currency tells you
A pair's price is the amount of quote currency that buys one unit of the base currency. In USD/JPY at 150.00, the yen is the quote currency: one US dollar costs 150 yen.
The quote currency also sets the size of a pip. When the Japanese yen is the quote, a pip is 0.01. For most other pairs it is 0.0001.
Why your profit starts in the quote currency
Every price move is a change in quote currency per unit of base. So the pip value and the profit or loss on a trade come out in the quote currency, then convert to your account currency.
Here is a worked example with round illustrative prices. One standard lot of USD/JPY is 100,000 dollars, so a one pip move of 0.01 yen is worth 100,000 × 0.01 = 1,000 yen.
In a USD account at 150.00 yen per dollar, that is 1,000 ÷ 150.00 = $6.67. On EUR/USD the quote currency is already the dollar, so a pip on one lot is a flat $10.
The pip value calculator does the conversion for any pair and account currency.
Questions
Is the quote currency the same as the counter currency?
Yes. Both names mean the second currency in a pair, the one the price is expressed in.
Why does pip value change on some pairs?
When the quote currency differs from your account currency, the pip value has to be converted at the current rate. As that rate moves, the converted pip value moves with it.
More terms in this chapter
ForexForex (foreign exchange, or FX) is the global market for trading currencies. Every price is quoted as a pair, such as EUR/USD, and trading happens over the counter between dealers rather than on one central exchange.
Currency pairA currency pair is the price of one currency in terms of another, such as EUR/USD. The first is the base currency, the second is the quote currency, and the price is how much of the quote currency buys one unit of the base.
Exchange rateAn exchange rate is the price of one currency in terms of another. EUR/USD at 1.10000 means one euro exchanges for 1.10000 US dollars. On a trading platform every rate comes as two prices: a bid you can sell at and a higher ask you can buy at.
Long and short positionsLong and short positions are the two directions a trade can take. Going long means buying a currency pair to profit if its price rises. Going short means selling it to profit if the price falls. In forex you can sell a pair as easily as you buy it.
Over-the-counter (OTC) marketIn an over-the-counter (OTC) market, traders deal directly with no central exchange. Spot forex works this way: dealer banks quote prices to each other and to brokers, so there is no single official price at any moment.
Liquidity providerLiquidity providers are banks and firms that quote buy and sell prices to a broker. They stand ready to trade at those prices. A broker combines their quotes into the bid and ask you see, sometimes adding its own markup to the spread.
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