The Basics of Forex Pairs

Understanding Currency Basics

In forex, a pair quotes one currency against another. For example, EUR/USD shows how many
U.S. dollars you need for one euro. The first is the base currency; the second is the quote.
Buying EUR/USD means buying euros and selling dollars.

What Makes Pairs Tick

• Majors: Include USD and other top currencies (EUR/USD, USD/JPY). High liquidity, low spreads.
• Minors: Two majors without USD (EUR/GBP, AUD/JPY). Good liquidity, moderate spreads.
• Exotics: One major + emerging currency (USD/TRY). Big moves, big risk — size carefully.

Base and Quote Currencies Unpacked

The Role of the Base

The base sets the tone. If EUR/USD = 1.10, one euro costs $1.10. When bullish on the Eurozone,
traders go long on EUR/USD — simple and direct.

The Power of the Quote

The quote shows what it takes to buy one base unit. If EUR/USD jumps from 1.10 → 1.12,
the dollar weakens and the euro strengthens. Even small quote shifts can have a major impact — especially with leverage.

Why Trends Matter in Forex Trading

Spotting the trend is half the game. Align with momentum instead of fighting it — that’s how traders stay on the right side of price.

Tools for Trend Analysis

• Moving Averages: Identify direction and smooth noise.
• RSI: Gauge momentum and potential exhaustion.
• Macro News: Rate decisions, CPI, and geopolitics drive currency shifts.

Getting Started with Currency Pairs

Choosing Pairs

Begin with major pairs for lower volatility and predictable spreads.
As you grow, explore minors and exotics — but manage risk tightly.

Developing a Trading Strategy

• Risk: Cap loss per trade (0.5–1% of your balance).
• Entries/Exits: Follow predefined rules — no on-the-fly adjustments.
• Position Size: Base size on stop distance, not emotion.
• Journal: Track setups, outcomes, and refine weekly.