Diversify your forex trading with exotic currency pairs

USDMXN – This pair represents the US dollar traded against the Mexican peso . Mexico has close geographical, political, and commercial ties with the United States, which makes the Mexican currency very sensitive to US policy changes. The preferred time for investors to trade USDMXN is during the US trading session. Exotic pairs are crosses between two currencies with the base currency representing a developed economy and the quote currency representing an emerging economy. Some examples include EUR/TRY , USD/ZAR , USD/MXN , USD/CZK , EUR/HKD . The exotic currency, as mentioned, is often small, relatively unknown, and it belongs to smaller economies and developing countries.

exotic pairs

Interestingly, ancient China elected to trade with the cowry shell in the 11th century, whereas the Aztec empire pronounced the copper tajadero as their preferred currency. A currency, more specifically, is money in any form when utilised in circulation, as a medium of exchange. This means that it can be used in financial transactions, including the buying of goods and services. Forex trading is the simultaneous buying of one currency and selling another. The label “exotic” has nothing to do with the location or size of the country or countries where the currency is used. The forex market is the largest financial market globally, with the highest amount of capi…


Some factors contribute to a currency pair being classified as exotic. The pair must include a currency from an emerging or smaller economy. The currency will typically be less stable and volatile than major currencies.

What is the easiest forex pair to trade?

What is the Easiest Currency Pair to Trade? EUR/USD is not just the easiest, but also the most stable currency pair to trade. It is the best choice not only among beginners but also for professional traders. This is one of the most traded currency pairs due to tight spreads and liquidity.

Not all brokers will trade all currencies, as we get into later on. If you’ve already started forex at all, you’ve already noticed that some currency pairs get more attention than others. China’s vast economy makes it so that its rising forex reserves is big news, while the need for larger reserves in the Central Bank of Sri Lanka might be harder to dig up information on.

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South Africa is one of Africa’s major economic powers and is heavily dependent on foreign trade. Therefore, the South African rand represents an emerging market that tradeallcrypto can be strongly affected by developments in global commodity markets. The dollar is one of the most stable currencies and remains the world’s major reserve currency.

exotic pairs

Beyond the major pairs, forex exotic pairs introduce a new world of risks and rewards in the currencies of emerging economies. While on one end of the risk spectrum, extreme price events such as a large devaluation are more likely, at the other end, technical pricing patterns are more predictable. What we need is to understand the extent of volatility for any given market.

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However, many traders still gravitate toward them because of the advantages they offer. Like scalping, day traders will also use technical analysis unless a sudden geopolitical event comes to light. Day traders trade positions within the day and don’t typically hold positions overnight. They also require generally fast execution and low commissions to make a profit from their trades which can sometimes result in a loss. Something that has worked well now might not work as well in the future so it is always wise to reassess your trading goals and the strategies you are using. The forex market is ever-changing and that is what makes it so special and the most globally traded financial market in the world.

exotic pairs

Price changes in these markets are often caused by political upheaval, rather than economies and interest rates as is more common with the major currencies. Exotic currencies refer to any currency that is infrequently traded in the forex market, and not often used in global transactions. These currencies can be extremely volatile, as they are often attached to developing or emerging countries whose economies can swing more quickly. Range trading is a strategy that seeks to profit from the consolidation of an asset price. To do this, traders will look for pairs that have been trading in a tight range and then seek to enter trades when the price breaks out of that range. First, it is important to know the increased risk involved in these pairs.

However, we must be concerned with how much risk we put on in each trade. We know how technical indicators work, and how reliable they are for the major currency pairs. For the majority of indicators, the major currency pairs were their testing ground.

Cross pairs

You cannot set stop-loss andtake-profit level like with a single currency pair position. You depend on two positions combined and the majority of the Forex brokers does not support combined stop-losses ortake-profits on two orders. Of course, you can assign separate SL and TP on both orders, but that does not mean that they will get executed simultaneously.

Traders should be wary of the country’s unemployment rates which are around 30%, one of the highest globally. The South African Reserve Bank is focused on two main factors; the country’s high inflation and unemployment rate. These pairs can also feature an exotic against an exotic, such as Turkish Lira and Singapore Dollar .

As we noted earlier, lexatrade are typically more volatile than major pairs and can move more dramatically. This increased volatility can result in larger losses if a trade goes against the trader. So why would a trader want to take on the additional risk of trading an exotic currency pair? Another factor that can make a pair exotic is if it is not frequently traded. This lack of liquidity can make it more difficult to enter and exit positions and result in wider spreads.

Over-the-counter derivatives are complex instruments and come with a high risk of losing substantially more than your initial investment rapidly due to leverage. You should consider whether you understand how over-the-counter derivatives work and whether you can afford to take the high level of risk to your capital. Investing in over-the-counter derivatives carries significant risks and is not suitable for all investors. It would also be difficult to find a broker that offers a currency pair including two exotic currencies, and if there was a broker out there that did offer it, the spreads would be quite large. If you are fairly new to the world of currency trading then starting with exotic currencies is not the best option.

Find the approximate amount of currency units to buy or sell so you can control your maximum risk per position. ATFX operates in Jordan through Emerging Markets for Financial Services which is regulated by Jordan Securities Commission Authority. If you’re just starting your trading journey, our “complete guide for beginners” is aimed at you. This website is not directed at any jurisdiction and is not intended for any use that would be contrary to local law or regulation. Volatility – The increased volatility as mentioned above can be good but also bad, with high risk and the chance to suffer more losses. For example, in FX if we wanted to trade GBP/USD, then British Pounds and US Dollars would be paired together as one unit of trade.

The USDZAR is a preferred asset in carry trading strategies due to its interest rate differentials. Forex Exotic currency pairs include one major currency alongside a currency from a developing or emerging market, such as USDSGP. This page displays all forex exotic pairs’ real-time data including ask price, bid price, price change, the high and the low recorded on the current trading day. Users can also enter the name of the exotic currency pairs they want to know in the search box to quickly enter the chart interface of the forex exotic pairs. If you are convinced your trading portfolio could be spiced up by a few exotic currency pairs, the next step is finding a forex trading service. Consider starting with a foreign exchange broker like Royal Capital Pro, recognized as one of the best forex brokers for exotics pair trading.

High leverage also leaves you exposed to potentially higher than anticipated losses when the market does move. As the first country to utilise virtual currency as legal tender, many have opposed the introduction of Bitcoin due to fears surrounding its instability. This anxiety was coincidentally proven to be true on the first day Bitcoin was introduced as legal tender when the cryptocurrency fell by 20% of its value. To understand the importance of currency exchange and the cryptocurrency revolution as it currently stands, we must begin with a deep dive into the origins of currency.

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In the forex market, currency pairs are made up of the base currency, the first currency that appears in the pair while the second currency of the pair is the quote currency or counter currency. In the above example, GBP would be the base currency and USD would be the quote currency. The risks of loss from investing in CFDs can be substantial and the value of your investments may fluctuate.

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Make sure that your top-tier fantasy currency pair is actually tradeable on your platform. You want to make sure you have one of the top forex brokers, and then check which pairs they’ll allow. Some brokers, like IG and Saxo Bank, are known for having a very wide selection of currency pairs available.

On 4 hour we see price has been respecting the area between 20 & 50 EMA, and approaching previous resistance turned support. It will be interesting to watch how this plays out in the coming weeks, whether the support will hold or fold. Rayner Teo is an independent trader, ex-prop trader, and founder of TradingwithRayner. While values shift, some of the cheapest currencies typically include the Vietnamese Dong, Ugandan Shilling, Indonesian Rupiah, and Uzbekistani Som. Trading policies and reports such as tariffs, policy changes to the North American Free Trade Agreement , and any changes in supply chains can impact the Mexican Peso. The THB responds to the Chinese economy, which is why the USD/THB pair is often used to bet on the changes in the China/U.S.

Why Choose a Currency Trading Platform with Exotic Pairs?

IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication.

The MXN is the currency of Mexico, which is not considered an emerging economy. However, this pair is less liquid than most major pairs and may have wider spreads. Higher volatility – Ensure the exotic currency pairs volatility meets your risk profile with a forex pairs volatility calculator. numerical differentiation python in forex are represented by a foreign currency from a developing or previously developing country, while the domestic currency is usually the US dollar. With some exceptions, exotic currency pairs are also quoted against the Euro.

There will likely be more volatility in times of political unrest in South Africa. Low liquidity also tends to mean wider spreads, so getting into – and out of – a trade at the right price is a task made more difficult. The talks on land and farm seizures in South Africa and a sharp rise in U.S. government bond yields drove international capital out of South Africa and led ZAR to serious fall. The growing risks of recession in South Africa’s economy also had a great impact on ZAR.