Why do currencies trade in pairs?

Whenever you enter a currency trade, there are two currencies involved. This is because the value of a currency itself does not change, but its value can change in relation to another currency. In other words, that dollar in your pocket will still be worth a dollar tomorrow; however, its value constantly fluctuates relative to other currencies. This is why currencies trade in pairs.

Many traders find it helpful to think of a currency pair as a single instrument, such as a stock. For example, if an equity trader believes that IBM stock will rise in value, that trader will buy or go long IBM stock. Similarly, if a trader believes that the Euro will rise against the U.S. Dollar, that trader can go long Euros and short the U.S. Dollar by buying the Euro/ U.S. Dollar currency pair. If the same trader believed that the U.S. Dollar would strengthen against the Euro, he or she would short the Euro/ U.S. Dollar currency pair.