Quote currency

What the quote currency means

In a currency pair, the quote currency is the second one listed. In EUR/USD, the euro is the base currency and the US dollar is the quote currency. The price of the pair tells you how many units of the quote currency are needed to buy one unit of the base currency. If EUR/USD is 1.0800, one euro costs 1.0800 US dollars.

The quote currency is also called the counter currency. It is the unit in which the price is expressed, and, in most cases, the unit in which profits and losses on a trade are first calculated.

Anyone trading forex or forex CFDs meets this idea on every ticket. Understanding which currency is the quote currency helps you work out what a pip is worth, what currency your profit lands in, and where currency conversion fees may apply.

How it works

A pair is written BASE/QUOTE. The price shows the value of one base unit in the quote currency. When the price rises, the base currency strengthens against the quote currency.

The key calculations follow from this:

• Pip value in the quote currency = pip size × position size in base units.
• Profit or loss, in quote currency = price change × position size in base units.
• If your account currency differs from the quote currency, the platform converts the result at the prevailing exchange rate.

For example, on EUR/USD a one-pip move on 100,000 euros is 0.0001 × 100,000 = 10 US dollars, in the quote currency. For USD/JPY, the quote currency is the yen, so the pip value comes out in yen and is then converted.

Which currency is the quote is a market convention, with the major pairs having established orders. The euro, pound, Australian dollar and New Zealand dollar are usually quoted as the base against the dollar, while the dollar is the base against the yen, Swiss franc and Canadian dollar. Cross pairs follow similar conventions.

A worked example

The numbers are illustrative. A trader with an account in euros buys 20,000 units of GBP/USD at 1.2500. The base is pound sterling and the quote is the US dollar.

1. Position value in quote currency = 20,000 × 1.2500 = 25,000 US dollars.
2. The price rises to 1.2560, a move of 0.0060, or 60 pips.
3. Profit in quote currency = 0.0060 × 20,000 = 120 US dollars.
4. The account is in euros, so the 120 dollars is converted. If EUR/USD is 1.0800, the profit is 120 ÷ 1.0800 = about 111.11 euros.
5. If the broker applies a conversion fee or markup, the amount credited is a little lower.

The example shows that the result of a trade starts in the quote currency and only then reaches your account currency.

Why it matters

The quote currency decides the denomination of your profit and loss and therefore your exposure to the exchange rate between it and your account currency. A trader with a euro account who trades USD-quoted pairs is exposed to the euro-dollar rate on every closed trade, even if the effect is small.

It also affects costs. Spreads are measured in the quote currency, and any conversion fee charged when profits are converted can add to the total cost. Brokers differ in whether they convert at market rates or add a markup.

When you hold positions overnight, swap charges are also computed in terms of the currencies involved and are converted to the account currency.

How to use it in practice

• Identify the base and quote of every pair before trading.
• Check the pip value in your account currency on the contract specification or calculator.
• Choose an account currency that matches your main quote currency or your everyday spending to reduce conversion.
• Ask your broker about currency conversion fees and the exchange rate used.
• Remember that cross pairs have both currencies different from your account currency, so conversion applies to the result.
• Review margin requirements, which are often calculated in the base currency and converted.

Common mistakes and misconceptions

• Mixing up base and quote and reading a rise as strength in the wrong currency.
• Assuming one pip always equals the same amount of money.
• Ignoring that profits are converted to the account currency.
• Thinking the quote currency is the one you are buying. When you buy the pair you buy the base and sell the quote.
• Overlooking conversion fees when account currency differs.
• Assuming all brokers use the same pair orderings for exotic or cross pairs.

Risks and limitations

Exchange rate movements between the quote currency and your account currency can alter the value of profits and losses. Leveraged forex and CFD trading carries a high risk of rapid loss, and conversion costs can add to drag on results. This is educational information, not advice.

How Brokeli looks at it

When we review brokers, we record the account currencies on offer, how profits in other currencies are converted and any conversion fee, because these costs come from the quote currency mismatch. The details are stored in the published research snapshot so that comparisons and cost calculators use the same data.