How the Currency Pairs Work
Forex trading involves the buying of one currency and selling of another currency at the same time. Currency pair values are computed by comparing the value of one currency in relation to another. The first currency of the pair is called the base currency. The second currency is called the quote currency. For example, in the USD/CHF, the United States dollar is the base currency and the Swiss Franc is the quote currency.
The price of the pair shows you how much of the quote currency it takes to purchase one unit of the base currency. So, if the pair USD/CHF is quoted at 1.66000, it would take 1.66 Swiss Francs to purchase 1 US dollar.
Although currency pairs involve two separate currencies, the pair trading itself is considered a single unit. The currency pair tells the trader how much of the quote currency is needed to purchase one unit of the base currency.
When you buy (long) a currency pair your buying the base currency and selling the quote currency. When you sell (short) a currency pair your selling the base currency and buying the quote currency. Continuing with our USD/CHF example at 1.66, if you buy the pair you will receive 1 US dollar for every 1.66 francs we sell. If you sell the pair you will receive 1.66 Swiss Francs for every 1 US dollar you sell.