How Currency Pairs Work: Master FX Currency Pairs In 5 Min

15 Price Action Patterns Insiders are Using If a hedge fund managers were using 15 specific price action patterns would you want to know?

Forex Trading is weirdโ€ฆ

You canโ€™t just buy or sell a currency, you have to trade them in pairs against each other. So, how do Forex pairs work?

Weโ€™re going to show you how currency pairs work in just a moment.

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Thanks for your patience, letโ€™s begin learning how currency pairs work!

Intro: How Currency Pairs Work?

This is one of the more important articles in our Forex Trading 101 series.

We are going to give you a basic understanding of how currency pairs work in Forex trading. We want you to really understand why we trade pairs against each other, and how to wrap your head around some of the concepts of currency pairs.

In another article, we will focus on Currency Pair Characteristics. Each currency pair has a different utility for the global market, so there are certain aspects of each pair that are important to understanding Forex currencies in a holistic way.

And yet, another article will specifically focus on the EUR/JPY currency pair. It is an important Forex Pair to understand, so we made a trading strategy for it.

After that, we decided to compile a guide focusing on Warren Buffettโ€™s views on Currency Trading.

Finally, we want to share our compilation of currency trading strategies that work in 2023 and beyond.

Letโ€™s continue learning about, how Forex pairs work!

Forex Currency Pairs

If you want to sell, also known as โ€œshortโ€, the USD, you have to match it up with another currency in order to make a transactionโ€ฆ

You canโ€™t just sell the USD. You must ALWAYS trade two currencies at one time in a โ€œpairโ€.

Theย Foreignย Exchange Market works through currency pairs, so thatโ€™s the only way we can trade it. And when you think about it, it only makes sense that way; it would be impossible to make a transaction any other way.

Think about it: If I were to go to the currency exchange at my local bank and buy some Euros with my United States Dollars, Iโ€™m still using a โ€œPair of Currencies.โ€ I amย buying Euros in exchange for myย own currency. Or in other words, I am selling my own money to buy Euros. It works the exact same way in the Forex Market.

Now, the tricky thing about Forex can be understanding the order that the pairs are listed in. For instance, there are a host of pairs that the USD is the second currency listed (for example, EUR/USD, GBP/USD, AUD/USD), but there are also many pairs that the USD is the first currency listed (for example, USD/CAD, USD/CHF, USD/JPY).

Making Sense Of Forex Currency Pairs

So how do we make sense of this?

Understanding the relationship is actually very simple once you get the hang of it.

Remember this: You are ALWAYS buying one currency and selling another when you make a transaction or a trade in Forex.


Understanding how the currency pair itself functions, enables you to determine whether to buy or sell a specific currency.

A Currency Pair as 2 Parts:

  • The currency listed first
    • The Currency listed first is Called the BASE CURRENCYโ€“In the EUR/USD, the Euro is the BASE CURRENCY.
  • The Currency listed second.
    • The Currency listed second is Called the QUOTE CURRENCYโ€“In the EUR/USD, the U.S. Dollar is the QUOTE CURRENCY.

Now, we are always buying (going โ€œlongโ€) or Selling (going โ€œshortโ€) a currency pair. You either sell or buy the pair as a whole.

When taking one of these actions, remember this:

The action you take, whether buying or selling, is done Directly to the Base Currency and Inversely to the Quote Currency.

Trading Strategy Guides

In other words, if you buy a pair, you are buying the Base (first currency listed) and selling the quote (second currency listed), so Buying the EUR/USD means that you are buying Euros and Selling U.S. Dollarsโ€“this is the same thing as going to the Exchange and โ€œsellingโ€ U.S. Dollars for Euros because you are buying Euros against U.S. Dollars. You can also read the best strategy onย how to use currency strength for trading success.

How currency pairs work example:

How Currency Pairs Work Graphic
Currency pairs

Understanding which currency you are buying and which you are selling is as simple as understanding the fundamentals of how a โ€œPairโ€ works.

Conclusion โ€” How Do Forex Pairs Work

Remember these few things, and you should have no problem determiningย how to use Currencyย Pairs:

1. A pair is listed using two different currencies in a given order
2. The first currency listed is the โ€œBaseโ€ Currency
3. The second currency listed is the โ€œQuoteโ€ Currency
4. Whatever action you take on the pair Directly affects the Base Currency and Inversely affects the Quote currency
5. You are always buying one currency AND selling one currency when you make a trade

Feel free to leave a comment or ask any questions below regarding how currency pairs work in Forex!

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15 Price Action Patterns Insiders are Using If a hedge fund managers were using 15 specific price action patterns would you want to know?

24 Comments

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  1. good article..keep posting such knowledgeble โ€ฆthanks
    glad if u will post some trading strategyโ€ฆthanks in advancee

  2. Pair info. is great. Hope I can print it off. Also would appreciate a simular one on basics of Forex for us newbies and print able too. Thanks Paul B.

  3. Good information but I wanted to know the relationship between different pairs, for example if you are buying EURUSD, will it be prudent to sell USDCHF or USDJPY since in the first eurusd trade you are selling the USD

  4. I think this article is very well explained. I can trade, mostly badly, but really enjoy it non the less.
    Well done

  5. Explanation is in laymanโ€™s terms and I understand it. Only one question. Iโ€™m curious how come USD is not the base for all currencies ?

  6. This is the first time I have read about this subject with clarity. Why all majors donโ€™t have the USD as their quote currency is something to know about but this is a very good start. Thanks Casey.

  7. Hey!Nice read.I have a question though.When selling/buying the base currency in a currency in the pair?Am I selling when it is strong and buying when it is weak?

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