What Determines Base and Counter Positions?

[NormanA]

Hi,

I’m still cramming before I do my first mock trade.

I noticed that, e.g., in most EUR and USD pairings, the EUR is almost always the base, and the USD is almost always the counter. Why is that? Is it because most of the trades between the two open with USDs buying EURs? Some other reason?

Thanks,
Vpip

[Clint]

I noticed that, e.g., in most EUR and USD pairings, the EUR is almost always the base, and the USD is almost always the counter. Why is that?

Hello, Vpip

This paragraph from a previous post will answer your question —

Check for accounts in GBP and calculating lot size

By international agreement, “normal” currency pairs are determined by the following [B]hierarchy:[/B]

EUR, GBP, AUD, NZD, USD, CAD, CHF, JPY, … etc,

and on down through the list of minor and exotic currencies.

[U]Here’s how this hierarchy is applied:[/U]

• the EUR is the base currency in all EUR-pairs

• the GBP is the base currency in all GBP-pairs, except EUR/GBP

• the AUD is the base currency in all AUD-pairs, except EUR/AUD and GBP/AUD

• the NZD is the base currency in all NZD-pairs, except EUR/NZD, GBP/NZD and AUD/NZD

• the USD is the base currency in all USD-pairs, except EUR/USD, GBP/USD, AUD/USD and NZD/USD

…etc.

.

[TheLastBear]

Great question, excellent answer. Many may never bother to learn things about trading forex outside of how to enter/exit their positions and how to come up with a strategy. Nice to see that there are traders out there who actually try to learn about trading.

[NormanA]

Hello, Vpip

This paragraph from a previous post will answer your question —

.

Thanks Clint,

You added one more ingredient to my understanding: The pairing positions are by international agreement; but perhaps you or someone else can answer this, which is what I’m trying to get at: Is there any reasoning behind why the EUR precedes the USD, and the same with all the other pairings. It’s hard for me to accept that the positioning decisions are just arbitrary.

Thanks again,
Vpip

[NormanA]

Great question, excellent answer. Many may never bother to learn things about trading forex outside of how to enter/exit their positions and how to come up with a strategy. Nice to see that there are traders out there who actually try to learn about trading.

Thanks for your encouraging words, Lastbear. Let’s hope it all plays out in profits!
And I wish the same for you!

Vpip

[Jason_Rogers]

Thanks Clint,

You added one more ingredient to my understanding: The pairing positions are by international agreement; but perhaps you or someone else can answer this, which is what I’m trying to get at: Is there any reasoning behind why the EUR precedes the USD, and the same with all the other pairings. It’s hard for me to accept that the positioning decisions are just arbitrary.

Thanks again,
Vpip

Since its inception in 1999 and as stipulated by the European Central Bank, the euro has first precedence as a base currency over all other currencies.

Typically, the currency that is worth more per unit tends to be the base currency in a pair. Notable exceptions are AUD and NZD which are base currencies versus the US dollar due their historic associations with the British empire and GBP.

[eddieb]

Thanks everyone’s for a very interesting and informative thread

[Tygma]

Then I have a question… I should maybe ask the actual broker about this but maybe one of you know.

I have several accounts at different brokers, and I have noticed by running trough CMC Markets currency library that I can actually choose what I want to be base and counter currency.
I can choose to trade EUR/USD or USD/EUR - they are both listed… and that goes for more or less the rest of all currencies too.

[NormanA]

Since its inception in 1999 and as stipulated by the European Central Bank, the euro has first precedence as a base currency over all other currencies.

Typically, the currency that is worth more per unit tends to be the base currency in a pair. Notable exceptions are AUD and NZD which are base currencies versus the US dollar due their historic associations with the British empire and GBP.

Thanks Jason,

That gets it for me.

Best to you,
Vpip

[anon5370623]

@Valepiptorian

Hi,

I’m still cramming before I do my first mock trade.

I noticed that, e.g., in most EUR and USD pairings, the EUR is almost always the base, and the USD is almost always the counter. Why is that? Is it because most of the trades between the two open with USDs buying EURs? Some other reason?

Thanks,
Vpip

Because it’s comfortable to make calculations, etc. when it’s 1.xx rather than 0.xxx