The standard practice while trading currencies is to trade the currency as a ‘pair’. The value of the pair keeps fluctuating as the trades flow through. An example of the pair could be USD-INR or GBP-INR. The currency pair has a standard format :
Base Currency / Quotation Currency = Value
There are three parts here, let’s figure out each one of them –
Base Currency – Base Currency is always fixed to 1 unit of a currency (like 1 US Dollar, 1 Indian Rupee, 1 Euro etc.)
Quotation Currency – Refers to another currency which equates to the base currency (obviously it can be any currency apart from the base currency)
Value – Indicates the value of the Quotation Currency against the Base Currency.
Confusing? Let’s take an example to make it clearer. Assume USD/INR = 82.
The Base Currency here is USD, and as I mentioned earlier, the Base Currency is always fixed to 1 unit. Hence this is fixed to 1 US Dollar.
Quotation Currency is in Indian Rupees (INR)
Value is 82, which means for 1 unit of Base Currency, i.e. 1 USD, the equivalent quotation currency is 82. In simpler terms $1 = ₹82.