This video deals with the foundational element of Forex trading - the currency pair. As we have covered in previous videos, all currencies are priced with relation to another currency.
Understanding the conventions behind how that pair is written, how it is referred to and how the price is presented is an essential basic skill, that you have to learn now to progress.
All currencies are written as a pair, usually with an accepted three letter acronym that refers to a specific currency a dividing slash and then the next three letter acronym.
In this example we have EUR which is EURO and USD which is US Dollar. These two are obvious, and most are unforgettable once you know, but some can be a little less clear to an English speaker - CHF, is the Swiss Franc, for instance - nothing to do with China!
You can write currency pairs without the slash, so just EURUSD and in Forex circles most people will understand what you are getting at.
When you write the price of a currency pair you have a base currency - which is the first of the pair, in this case the Euro, and the quote currency, the second in the pair, in this case the US Dollar.
The base currency is the currency that is being priced. The number of the price is how much of the quote currency 1 of the base currency would cost to buy or could be sold for.
In a simple example, if USD was half as valuable as the EURO, the price of EUR/USD would be 2.0000 That is because you would need to sell two dollars to buy 1 Euro and 1 Euro would buy you two dollars.
The base currency is always 1, the price of the pair is the amount of the quote currency that would buy you one of the base currency.
This idea seems a bit odd but you’ll understand it very quickly once you have seen a few examples.