Every currency pair consists of:

• Base currency – the first currency listed
• Quote currency – the second currency listed

Example:

• GBP/USD = 1.2500

This means it costs 1.25 US Dollars to buy 1 British Pound.

The base currency is the currency being bought or sold, while the quote currency represents its value. When the exchange rate rises, the base currency is strengthening. When the exchange rate falls, the base currency is weakening.

Understanding this structure is essential because all profit and loss calculations are based on movements in the base currency relative to the quote currency.