A currency pair is an exchange ratio. In EUR/USD, EUR is the base and USD is the quote. A price of 1.1000 means one euro costs 1.10 US dollars. Buying the pair creates exposure to a rise in the euro relative to the dollar; selling creates the opposite exposure. Both currencies matter.
The instrument matters too. A spot currency conversion, a rolling retail forex position, a CFD and an exchange-traded futures contract do not have identical settlement, financing or counterparty arrangements. Read the contract specification before using any calculator. A ticker alone does not tell you the legal product you hold.
Worked example
Illustration: 10,000 EUR bought at 1.1000 and sold at 1.1050 produces 50 USD before spread, commission and financing. A move to 1.0950 loses 50 USD on the same size.
Check your understanding
In GBP/JPY, which currency is the quote currency, and in which currency is the initial price-move profit measured?
Show explanation
JPY is the quote currency. The initial profit or loss is measured in yen, then converted if the account uses another currency.
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