If you’re new to the world of foreign exchange trading, it may seem like forex traders are speaking another language. JPY? USD? GBP? What

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do all those letters mean, anyway? And what’s with all the numbers?

The forex language may seem pretty intimidating, but it’s actually not that hard to master once you get the hang of it. Let’s take a look at the terminology used to determine various currency values.

What the Letters Mean

The three letters simply refer to one country’s currency. USD means “United States dollar,” and it’s almost always used as the base currency for trading pairs. Base currency simply means it’s the “base” by which other currencies are measured. The second set of letters is your “quote currency.” So if you’re looking at a currency pairing for USD/JPY, you’re looking how many units of Japanese yen you’ll receive for one United States dollar. USD is your base currency, JPY is your quote currency: the currency measured in terms of one base currency unit.

Cross-Rate Currencies

The dollar is almost always used as the base currency. However, what happens when you want to compare yen to euros? Such pairings are called “crosses” because they don’t use the American dollar at all.

Still Confused?

Some forex traders (UFX Markets, for example) will let you try your hand at forex trading in a “practice mode.” This lets you practice trading without spending any money — it’s an ideal way to learn how the market works.