First of all let us outline what currency is. The word currency comes from the Latin word 'currens' which means 'in circulation'. Hence the term currency reflects that money is used as a medium of circulation. The UN recognises a total of 180 currencies across the world. Currencies' values change due to the forces of demand and supply, and this is where the currency pairs come into play. This is how one currency is valued in relation to another currency. In forex markets you cannot trade currencies singularly, as currencies need to be traded in pairs. This means you will have the base currency and the counter currency. Effectively you will be buying one currency and selling the other.

A currency pair is a fundamental concept in the realm of foreign exchange (forex) trading, representing the relative value of one currency against another. In forex markets, currencies are traded in pairs because their value is always measured against another currency. Each pair consists of a base currency and a quote currency. The base currency is the first one listed in the pair, while the quote currency is the second.

For example, in the EUR/USD currency pair, the euro (EUR) is the base currency, and the U.S. dollar (USD) is the quote currency. The exchange rate indicates how much of the quote currency is needed to purchase one unit of the base currency. Understanding currency pairs is essential for traders, as they analyze and speculate on the direction of exchange rates to make informed decisions about buying or selling currencies in the dynamic forex market.