Now, how are currency pair positioned against each other? Let's take EUR/USD pair for example. Base currency in this pair is euro (base currency is always on the left), while counter currency is USD(counter currency is always on the the right). How does Forex function? Forex price movements are triggered by currencies either appreciating in value (strengthening) or depreciating in value (weakening). If the price of EUR/USD for example was to fall, this would indicate that the counter currency (US dollars) was appreciating, whilst the base currency (Euros) was depreciating. Forex is based on traders putting their money according to their beliefs on that whether currency will strengthen or weaken. This belief is based on several technical and fundamental factors more about which you can find out in reading other articles in our education section.
Next Chapter will introduce traders with two major Forex concepts – Pips and Spreads.