Currency Exchange – Base against Counter

Now that foreign currency symbols have been clarified, it is important to read currency exchange programs and pairs correctly. One currency in a currency pair is always dominant; this is called the Base Currency. The base currency is identified as the first currency in a currency pair. It also is the currency that remains constant when determining a currency pair's price. The other currency exchange in the pair is referred to as the counter currency. The base in the currency exchange is always equal to one of the currency's monetary unit of exchange, for example 1 Dollar or 1 Pound. If an investor buys 10,000 GBP/USD, the British pound as the base currency is being bought or received, and the US Dollar as the counter currency is being sold. The amount of the Base Currency being bought is equal to 10,000 GBP. This always applies regardless of the universal currency conversion. The base currency amount remains constant; it determines the values of currencies exchanged with Forex strategy on the market.

Although the pairs may appear complex, once investors have become familiar with reading quotes and formulated a suitable Forex strategy , it becomes comprehensible, reading foreign currency symbols becomes a second nature. The counter currency amount that the investor is selling will fluctuate with the exchange rate for the currency pair. Since it is this part of the currency exchange pair that fluctuates higher or lower, it determines the strength or weakness of both currencies in the pair. As with everything, when one currency goes up, the other must go down. When a currency exchange pair goes from a low price to a higher price, the base currency is said to have strengthened. The converse is true of the counter currency; it has been weakened as the base currency has strengthened.