Quote currency

What is Quote currency in forex and CFD trading

The quote currency, also known as the counter currency or secondary currency, is the second currency that appears in any currency pair quotation; it is the currency used to express the value of one unit of the base currency. For example, in the EUR/USD currency pair, the US Dollar (USD) is the quote currency. The quote currency matters for real forex and CFD trading decisions because its unit of value determines the pip value in absolute terms, directly dictating the profit or loss (PnL) in the market. A trader can verify the quote currency by observing the currency code listed second in the pair on their trading platform, and confirming that the entire price quote is denominated in units of the quote currency.

Key facts about Quote currency

• Position: The quote currency is always positioned second in a currency pair, after the slash or hyphen (e.g., EUR/GBP, where GBP is the quote currency).
• Price Expression: The price quote for the pair (e.g., 1.0850) signifies that one unit of the base currency costs 1.0850 units of the quote currency.
• Pip Value Denomination: The monetary value of a single pip movement for any given trade size is always calculated and expressed in units of the quote currency.
• PnL Basis: All raw profit or loss generated from a trade is initially calculated in the quote currency before being converted to the trader’s account currency, if different.
• Cost Measurement: Spreads and commissions are frequently measured in pips, which are valued in the quote currency units, affecting transaction costs.

How Quote currency works in forex and CFD trading

The quote currency provides the unit of measure for the exchange rate and determines the monetary result of a trade.

The mechanics of the quote currency involve:

• Price Determination: When the EUR/USD price is 1.0850, this means that the cost of 1 Euro is 1.0850 US Dollars, establishing the USD as the unit of pricing.
• Trade Action Value: When a trader buys 100,000 units of the base currency (EUR), they are paying 100,000 × 1.0850 = 108,500 units of the quote currency (USD).
• Pip Value Calculation: For a non-JPY pair, the pip value (in quote currency) is calculated as: Pip Value = (0.0001) × Lot Size (in Base Currency) × Conversion Rate (Quote to Account)
• Closing PnL: Upon closing a position, the PnL is the difference between the exit price and entry price multiplied by the volume, with the resulting value expressed directly in the quote currency.

Example of Quote currency with a real trade

This example shows how the quote currency (USD) is used to denominate the trade’s PnL.

• Base currency: EUR
• Quote currency: USD
• Entry (Sell) Bid Price: 1.0800
• Exit (Buy) Ask Price: 1.0770
• Position size: 1 standard lot (100,000 units)

Price Difference: 1.0800 – 1.0770 = 0.0030
Profit in Pips: 30 pips
Pip Value: Since USD is the quote currency and typically the account currency for this example, the standard pip value is $10.00 per lot.

Gross Profit: 30 pips × $10/pip = $300
Spread Cost: 0.2 pips × $10/pip = $2.00
Commission: $0.00 (zero commission structure)
Net Profit: $300 – $2.00 = $298.00

Result: The trade yields a net profit of $298.00, which is denominated in the quote currency (USD). Zero commission structure eliminates per-trade commission fees.

How Quote currency affects your cost and risk

The quote currency directly influences trading cost and risk by determining the absolute monetary value of each pip movement, thereby controlling the PnL generated per trade. When the quote currency is not the account currency, an additional layer of currency conversion risk is introduced upon PnL settlement.

Quote currency compared with related concepts

Quote currency vs Base currency

The quote currency is the currency used to price the base currency, defining the cost of one unit of the base currency, whereas the base currency is the reference asset being bought or sold; the quote currency determines the monetary value of a pip, while the base currency determines the contract size.

Quote currency vs Pip value

The quote currency is the denomination in which the pip value is calculated, meaning the quote currency is the unit of measure (e.g., USD or JPY), whereas the pip value is the calculated, absolute monetary worth of a one-pip movement for a specific lot size; the quote currency is structural, and the pip value is the resultant cost/profit metric.

Broker differences in Quote currency across the industry

The key broker difference concerning the quote currency involves the mechanism and transparency of converting PnL from the quote currency into the trader’s account currency.

How to verify Quote currency on your trading platform

To verify the role and value of the quote currency on a common platform like TraderEvolution, a trader should follow these steps:

• Select Currency Pair: Open the Symbols window and select a currency pair, such as AUD/CAD. The CAD is the quote currency.
• Open Order Ticket: Navigate to the Trade Watch panel and open an order ticket for the AUD/CAD pair.
• Check Pip Value Denomination: Observe that the calculated Pip Value displayed in the order ticket is expressed in units of the quote currency (CAD), before any final account conversion.
• Monitor PnL Display: Execute a small market order and open the Positions tab in the Trade Watch. Monitor the PnL which will be displayed in two currencies: first, the raw PnL in the quote currency (CAD), and second, the converted PnL in the account currency.
• Confirm Pricing Currency Field: Check the Symbol Settings or Information tab for the AUD/CAD pair to confirm that the Pricing Currency field explicitly names the quote currency (CAD). For more essential trading terms, consult our forex glossary.
• Sanity check: For the EUR/USD pair, the pip value should be exactly $10.00 per standard lot because USD (the quote currency) is the de facto standard for this value calculation.