If this seems confusing then you're in luck. You can always get by with just thinking of entire pair as one item. Then you are just buying or selling that one item. Thinking like this will still enable you to place trades. You only need to be aware of base/counter concept for Fundamental Analysis issues.

So why is it important to know about base/counter currency? The base/counter currency concept illustrates what is actually taking place in a Forex transaction. Some of you reading this, know that short-selling was restricted in stock market *(Short-selling is where you sell a stock/currency/option/commodity first and then try to buy it back at a lower price later). But in FOREX you are always buying one currency (base) and selling another (counter). If you sell pair you are simply flipping which one you buy and which one you sell. The transaction is essentially same. This allows you to short-sell with no restrictions.

You want to be able to short-sell with no restrictions so you can make money when market drops as well as when it rises. The problem with traditional stock market trading is that market has to go up for you to make money. With FOREX trading you can make money in all directions. http://www.1-forex.com