When trading in the Foreign Exchange market, you are investing in a currency pair by buying one currency and simultaneously selling another. For instance, if you believe that the EUR will strengthen against the USD, you will invest in the EUR/USD pair. The EUR is referred to as the “base currency” while the USD is known as the “quote”, or “counterpart currency”.
With regards to this currency pair, you are buying the EUR and selling the USD. There are different types of currency pairs to invest in including the majors, minors and exotics. Each type has different levels of liquidity as well as currency pairings. For instance, the Majors always include the biggest commodity currencies trading against the USD. There are many factors that can influence the price of these currency pairs such as political conditions, economic factors, market psychology, and central bank decisions.
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