Exotic Currency Pairs 101 2023: Complete Beginners Guide

Their staff is really helpful throughout the process and the rates applied are also lesser compared to other forex providers. The Rand’s value also correlates to iron ore, platinum, and agriculture. If you want to understand what might happen to this currency’s value, you’ll want to keep an eye on how these sectors are impacted by political choices and even weather. There will likely be more volatility in times of political unrest in South Africa. South Africa’s largest export is gold, so their economy will correlate strongly to the price of gold. For example, during the financial crisis of 2008, gold prices plummeted and the Rand decreased in value about 35% in comparison to the British pound.

  • Major currencies, such as the US dollar (USD), euro (EUR), and Japanese yen (JPY), are highly liquid and widely traded.
  • Here, the most important criteria for your broker needs to be their trustworthiness and the fact that they won’t shut down for a long time to come.
  • Leveraged trading in foreign currency contracts or other off-exchange products on margin carries a high level of risk and may not be suitable for everyone.
  • Remember to stay informed, conduct thorough research, and develop a solid trading strategy.
  • Further, because they are thinly traded, these currency pairs can have some hidden opportunities that most traders are not focusing on.
  • It’s essential to develop a solid risk management plan and adhere to it consistently to protect yourself from unexpected market movements.

Traders who are skilled at analyzing these factors can potentially capitalize on the volatility and profit from price movements. Minor currencies, also known as cross-currency pairs, consist of currencies that are not paired with the US dollar. Examples include the euro against the British pound (EUR/GBP) and the Australian dollar against the Japanese yen (AUD/JPY). Trading minor currencies can provide additional trading opportunities and diversify your portfolio beyond the major currency pairs. Major currency pairs are the most traded in the forex market because of their popularity and higher liquidity.

What You Should Know Before You Start Trading

By diversifying your forex portfolio across different currency types, you can potentially spread out the risk and take advantage of various market conditions. This can help enhance your overall trading performance and reduce the impact of any unfavorable movements in a particular currency pair. Forex trading involves pairing two currencies together and speculating on whether the value of one bp shares buy sell currency will rise or fall in relation to the other. Currencies are traded in pairs, with the first currency in the pair being the base currency and the second currency being the quote currency. The exchange rate represents the value of one currency in terms of the other. If you are fairly new to the world of currency trading then starting with exotic currencies is not the best option.

You should read and understand these documents before applying for any AxiTrader products or services and obtain independent professional advice as necessary. Forex position trading is mostly driven by fundamental biggest stock gainers of all time analysis and closely resembles traditional stock trading. Here, the most important criteria for your broker needs to be their trustworthiness and the fact that they won’t shut down for a long time to come.

  • These pairings include the combination of one of the 8 major currencies and a currency from a developing or emerging economy.
  • Despite their lower trading volume, exotic currencies can offer unique opportunities for traders.
  • CORP. does not provide services for United States, BVI, Japan and Russian residents.
  • Let’s go through this checklist before you invest your hard-earned cash in a currency you just heard of this morning.
  • IG International Limited is licensed to conduct investment business and digital asset business by the Bermuda Monetary Authority.

Trading exotic currency pairs requires extensive research, knowledge of forex fundamentals and technicals, as well as proper risk management and discipline. These factors make them difficult to trade for beginners or low-risk traders. Experienced traders seeking greater diversity and opportunities in the forex market may find them more suitable. One of the key advantages of range trading is that it’s considered a relatively low-risk strategy. This is particularly useful when trading exotic currency pairs, which aren’t known for minimizing trading risk. With IG, you can take a position on exotic currency pairs by trading CFDs.

List of Exotic Currencies

There are three main types of currency pairs, and each type has its own unique characteristics and advantages. Breakout trading relies on a combination of both technical and fundamental analysis to capitalise on an asset’s price movements once it breaks through a historical level of support or resistance. The most popular chart patterns to use during a breakout are ascending and descending triangles, pennants and wedges. choosing a forex broker Milan Cutkovic has over eight years of experience in trading and market analysis across forex, indices, commodities, and stocks. He was one of the first traders accepted into the Axi Select programme which identifies highly talented traders and assists them with professional development. A currency pair is the quotation of two different currencies, with the value of one currency being quoted against the other.

What you need to know before trading exotic currency pairs

If you’re trading a commodity currency, you may be able to hedge your forex trades by making counter-investments in opposite currencies through particularly turbulent times. It has a very low cost to borrow, making it a common choice for carry trading. It’s considered a safe haven for many who trade it alongside the U.S. dollar. 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.

Another advantage of trading exotic currencies is the benefit of portfolio diversification. Including exotic currencies in your forex portfolio allows you to spread your investment across different currency types and regions. This diversification can help reduce the overall risk of your portfolio, as the performance of exotic currencies may not always follow the same patterns as major and minor currencies.

Spreads are larger on foreign currency values than their majors or minor counterparts. Instead of trying to analyze complex market conditions, you’re only focusing on the direction of the existing trend. Do your due diligence, and conduct fundamental analysis and technical analysis on the forex pair you are interested in opening a position on.

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. To trade exotic currency pairs, choose a forex broker that offers this option and consider its fees, leverage and margin requirements.

USD/THB (U.S. Dollar/Thailand Baht) 💵

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. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. When a market is more volatile, it means that price movements are more frequent and possibly more dramatic than markets which are less volatile. As a result, volatility offers an opportunity to realise a profit thanks to drastic and sudden price movements, although this can also mean that there is greater risk of loss. The analysis can be a mix of technical and fundamental analysis as both can affect the pricing in this time frame.

Regularly monitoring news and economic indicators can help traders make informed decisions. Major currencies, also known as base currencies, are the most widely traded currencies in the forex market. These currencies belong to economically stable countries with well-established financial systems. Some of the major currencies include the US dollar (USD), euro (EUR), Japanese yen (JPY), British pound (GBP), and Swiss franc (CHF). Due to their high liquidity and trading volume, major currencies offer tight spreads and are often preferred by traders. Understanding major currency pairs is crucial for navigating the forex market effectively.

I am a graduate student at the Carlson School of Management with my roots in Banglore. Bookmyforex by far has the best conversion rates with the least hassles and extremely supportive staff. I recommend every prospective student or traveler going aboard to use Bookmyforex and experience their amazing service. In addition to the commodity currencies, the Minors also include the Scandinavian Currencies. Five Minute Finance has influenced how I see finance – I rely on it for insight on the latest news and trends at the intersection of finance and technology. Australia is the second-largest producer of gold in the world, so their Dollar is likely to rise when the price of gold rises.

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—Australian Dollar-AUD or Australian Dollar is the official currency of Australia. AUD is at the other end of 6.5% of all forex trading transaction daily. The other name for Minor currencies is Commodity Currencies or Com Dollars. These are minor currencies that belong to countries that have resources particularly natural which give the currency of their country an edge, an intrinsic value.

Why trade exotic currency pairs?

OANDA Europe Markets Limited is a company registered in Malta number C95813, and has its registered office at 11, SOHO Offices J Block, Savoy Gardens Triq d’Argens, Gzira, Malta. It is authorised and regulated by the Malta Financial Services Authority. Milan is frequently quoted and mentioned in many financial publications, including Yahoo Finance, Business Insider, Barrons, CNN, Reuters, New York Post, and MarketWatch. 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. These risks are mostly because of the characteristics that we have mentioned in the previous section. For example, in 2022, the EUR/USD pair crashed so hard that it moved below parity level.

If you are looking to trade exotic currency pairs, you might want to know which ones are the most popular and widely traded. Classification of currency pairs based on popularity and liquidity include major, minor and exotic currency pairs. Exotic currency pairs may seem intimidating at first, but they don’t have to be an obstacle for forex traders willing to take on additional risk. Such currencies can experience significant price movements due to economic and political events in their respective countries. Exotic currencies generally have lower trading volumes compared to major and minor currencies. As a result, there is often less competition among traders in these markets.

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