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Currencies are quoted in pairs, e.g. GBP/USD, USD/CHF etc. The first listed currency is called the “base” currency. The base currency is the basis for the buy or sell transaction. The second listed currency is called the “counter” or “quote” currency. As an example, if you place a buy GBP/USD order with your broker what you have effectively done is sell US dollars and bought Great British pounds (GBP). By definition, the first currency is the stronger between the two.

Let’s look at another example:

USD/CAD
If you believe that the Canadian government is going to weaken its currency (Canadian dollar) in order to help its export industry you would BUY USD/CAD (in trading terms: GO LONG). Why? Because you want to own US dollars while they appreciate against the Canadian dollar.

On the other hand, if you believe that due to instability in the US economy the US dollar will lose value you would execute a SELL USD/CAD (in trading terms: GO SHORT). By doing so you have sold US dollars with the expectation that they will depreciate against the Canadian dollar.

There are many currency pairs in existence. However, the ones I consider important are those with the best market liquidity, i.e. the most heavily trade. They posses all the quality a good market has for trading purposes. The following is a list of these currency pairs:

EUR/USD : Euro and United States dollar
USD/JPY : United States dollar and Japanese yen
USD/CHF : United States dollar and Swiss franc
GBP/USD : Great British pound and United States dollar
AUD/USD : Australian dollar and United States dollar
USD/CAD : United States dollar and Canadian dollar

(Forex Trading Machine)