Counter Currency – What is a Counter Currency?

What is a Counter Currency?

Definition of Counter Currency: This is the second in the list of the currency pairs, generally called as quote currency. Handling currencies is a bit confusing at the initial stage as one has to always handle the currency pair. The initial currency in this currency pair is known as “Base Currency”. Another currency following the base currency is known as “counter currency” or “quote currency.” A quotation is defined as how many counter currencies will be needed to buy a single base currency. A currency’s quotation contains two costs. The Bid which is generally lesser than “ask” is the cost according to which a broker or market maker wishes to purchase the base currency by exchanging the quote currency. Offer or ask is generally higher when compared to the bid. It is the cost according to which a broker wishes to vend the base the base currency by exchanging the currency known by the name of quote currency. For example, if the bid cost for a pair of USD is nearly 1.2750 whereas the offer cost is 1.2752, 2 “pips” is the difference between the two. Most of the Forex trading brokers obtain their trading gains from the spreads. Therefore, it is profitable to review the spreads prior to transacting trades.