The short answer
A currency pair prices one currency in terms of another — in EUR/USD, the euro is the base and the dollar is the quote, and the price is how many dollars buy one euro. Pairs are grouped as majors (all include the US dollar, e.g. EUR/USD, USD/JPY), minors or crosses (no dollar, e.g. EUR/GBP), and exotics (a major currency against an emerging-market one, e.g. USD/SGD). Beginners should trade the majors: they are the most liquid and have the tightest spreads.
What is a currency pair?
You never trade a currency on its own — always one against another. A pair like EUR/USD quotes the value of the first currency (the base) in units of the second (the quote). If EUR/USD is 1.0850, one euro costs 1.0850 US dollars.
Buying the pair means going long the base and short the quote: buy EUR/USD and you profit if the euro strengthens against the dollar. Selling is the reverse. Every forex position is simultaneously a bet on one currency and against another — there is no neutral leg.
Base, quote and direction
Getting base and quote straight prevents a surprising number of beginner errors. The base is always the first currency and is the one you are buying or selling; the quote is the price. A rising number means the base is getting stronger, the quote weaker.
This also determines your pip value: pips are measured in the quote currency, which is why pip value differs across pairs and sometimes needs converting to your account currency.
Major pairs
The majors are the pairs that include the US dollar against another large, freely traded currency. The commonly listed seven are EUR/USD, USD/JPY, GBP/USD, USD/CHF, AUD/USD, USD/CAD and NZD/USD.
They dominate global volume, EUR/USD most of all. High volume means deep liquidity and tight spreads — the practical reasons they are the right place to start. Tighter spreads mean lower trading costs on every position.
Minor pairs (crosses)
Minors, also called crosses, are pairs that do not include the US dollar — EUR/GBP, EUR/JPY, GBP/JPY, AUD/JPY and so on. They let you trade a view on two non-dollar economies directly.
Full guide: USD/SGD: the pair Singapore traders should understand first
Crosses are still liquid but generally carry slightly wider spreads than the majors, and some — the yen crosses especially — can move quickly. Reasonable to trade once you are comfortable, but not the easiest starting point.
Exotic pairs
Exotics pair a major currency with an emerging-market or smaller-economy currency — USD/SGD, USD/ZAR, USD/TRY, USD/MXN. They can trend strongly, but liquidity is thinner, spreads are much wider, and moves around local news can be violent.
The wide spread alone makes exotics an expensive place to learn. Treat them as an advanced choice, not a beginner one.
Which pairs should beginners trade?
Start with one or two majors — EUR/USD is the standard first pair for good reason: it is the most liquid instrument on earth and its spread is usually the tightest available. Trading fewer pairs also means you learn their typical behaviour instead of spreading your attention thin.
Cheaper spreads compound: every pip you do not pay in spread is a pip of edge kept. Master the majors first, size positions from the lot-size rules, and only branch into crosses once your process is consistent.
Frequently Asked Questions
What is the difference between the base and quote currency?
The base is the first currency in the pair and the one you buy or sell; the quote is the second, and it is the price. In EUR/USD at 1.0850, one euro (base) costs 1.0850 US dollars (quote).
What are the major forex pairs?
The majors all include the US dollar: EUR/USD, USD/JPY, GBP/USD, USD/CHF, AUD/USD, USD/CAD and NZD/USD. They are the most liquid and have the tightest spreads.
What is the difference between a minor and an exotic pair?
Minors (crosses) are liquid pairs without the US dollar, like EUR/GBP. Exotics pair a major currency with an emerging-market currency, like USD/ZAR, and have much wider spreads and thinner liquidity.
Which currency pair is best for beginners?
EUR/USD. It is the most traded pair, so it has deep liquidity and the tightest spread, which keeps trading costs low while you learn.
How many currency pairs should I trade as a beginner?
One or two majors. Trading fewer pairs lets you learn their typical behaviour and keeps costs low, rather than spreading your attention across many instruments.