forex exotic pairs

If you also wish to understand more about exotic currency pairs and trade using them, keep reading to understand everything about them. The low liquidity in these markets make these pairs pricey when trading. However, high interest rates and frequent price fluctuations may provide a chance of higher returns. These exotic currency pairs come with higher risk, so only experienced traders tend to trade them. Some are the major ones that are easily traded, while the minor ones may take time to execute. Exotic currency pairs are quotations that consist of one major currency (USD, EUR, GBP, JPY, etc.) and one currency from a developing country (SEK, TRY, ZAR, HUF, MXN, etc.).

  • The table below includes all the exotic forex pairs available to trade with Axi.
  • In the end, how much volume is traded by the traders makes a current pair exotic.
  • But as much as that is the case, the Rand still relies on exports, which consist of gold, agriculture, and the booming automotive industry that adds up to 10% of the South African exports.
  • This currency pair is shaped by the recent stability of the Thai economy.

A currency pair is the quotation of two different currencies, with the value of one currency being quoted against the other. The first listed currency of a currency pair is called the base currency, and the second currency is called the quote currency. Countries that are in or close to Europe are generally traded against the Euro, while other exotic currencies would be traded against the USD. Examples would include EUR/TRY (Euro/Turkish Lira) and USD/ZAR (US Dollar/South Africa Rand).

Exotic Currency Pairs 101

He was one of the first traders accepted into the Axi Select program which identifies highly talented traders and assists them with professional development. The Australian Dollar is a commodity currency, and can be somewhat volatile thanks to that. As the biggest exporter of coal and iron ore, as well as a major producer of petroleum and gold, Australia’s economy can fluctuate based on the price of these commodities. The U.S. Dollar is the most traded currency in the world because the United States has a strong currency that is often a staple of the global economy. The dollar is frequently impacted by new policies or announcements from the Fed, stimulus packages, and major news.

  • The value of each currency is relative to other currency in a currency pair.
  • The forex market is open 24 hours a day, five days a week (including most holidays), and sees a huge amount of trading volume.
  • While they have committed to change over to the Euro eventually through the Treaty of Maastricht, there seems to be little popular support for this move.
  • While has some data verified, it can vary from time to time.
  • Therefore, any change in global oil prices causes this currency pair to fluctuate.

These pairs often exhibit higher volatility and less liquidity compared to more commonly traded currency pairs, but they can also offer greater potential for profit. In this article, we will discuss four trading strategies for forex exotic pairs and provide some tips for effective trading. Forex exotic pairs are a unique type of currency pair that offer new opportunities for forex traders.

What are all of the forex exotic currency pairs?

In this guide, we’ll take you through the basics of trading exotic currency pairs and highlight a few options and how they work so you can get started trading. In forex trading, exotic currency pairs are those pairs that are less traded in the market. While the idea of being on your own little desert island in the market might excite you, these pairs work a bit differently from the majors – so you’ll need different strategies. With IG, you can take a position on exotic currency pairs by trading CFDs. In doing so, you would be speculating of the price movements of a currency pair rather than buying or selling the currencies themselves. This enables you to go long or short, meaning that you have the potential to profit from markets that are rising as well as falling.

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This is a bit of a time intensive approach to trading Forex it can be wildly profitable. You have to be careful for false breakouts, though – those can tank your profits in a hurry. It’s part and parcel of trading these kinds of currencies, and while it’s part of the fun and excitement of exotics it can also be pretty stressful. Political ties and changes also affect nations, so you need to be aware of that too. Such changes can often create substantial price fluctuations, affecting the forex market.

The best Trading Strategy for Exotic Pairs

The USD/SGD currency pair represents the exchange rate between the US dollar and the Singapore dollar. Singapore is a major financial center and has a free-floating currency, which makes the USD/SGD pair volatile. The USD/HKD currency pair represents the exchange rate between the US dollar and the Hong Kong dollar. Hong Kong is a major financial center and has a free-floating currency, which makes the USD/HKD pair volatile. This type of currency is affected by different factors than the forex majors and minor pairs.

forex exotic pairs

When a specific price level is reached, the stop-loss order will automatically close the trade, limiting the trader’s losses. This is especially important when trading exotic currency pairs as the high volatility can result in large losses if the trade is not properly managed. Major currency pairs are the most traded in the forex market because of their popularity and higher liquidity. The best exotic forex pairs to trade are the most liquid, such as USDSEK, USDNOK, USDMXN, GBPSEK, USDZAR, MXNJPY, GBPTRY.

Breakout Trading Strategy

There are many benefits to forex trading in general, and the ability to trade a variety of exotic currencies from around the world is one of them. According to studies in 2016 by the Bank for International Settlements, the OTC foreign exchange turnover of the USD/EUR pair made up 23.1% of daily forex transactions. To put that into perspective, one of the more popular exotic currency pairs, the USD/RUB, only had a daily trading volume of 1.1%.

There are many cons of trading exotic currency pairs due to large spread, high commission rates, and low liquidity. The exotic currency market is one of the most popular forms of alternative investments. As a trader, you can take positions in exotic currencies and hold them in the form of futures or any other form you want.

Trading example: comparing USD/TRY and EUR/USD

These exotic pairs, during long trends, have high volatility, average spreads, and often potential profitability. However, you must control your risk because exotic pairs can make strong movements and burn your account. Finally, there’s also the availability issue regarding these two types of currency pairs.

forex exotic pairs

RISK DISCLOSURETrading forex on margin carries a high level of risk and may not be suitable for all investors. Losses can exceed deposits.Past performance is not indicative of future results. The performance quoted may be before charges, which will reduce illustrated performance.Please ensure that you fully understand the risks involved. If you are interested in learning more about forex trading, exotic pairs, and other related topics, be sure to check out Alphaex Capital. Finally, the key to successful risk management in exotic forex trading is patience and discipline. Traders must resist the urge to over-leverage their positions and must be patient in waiting for the right trading opportunity.