If you think from the title that the pair with the most exotic name has the most money to be made, you are partly right. They are both more profitable and risky.
Forex dealing always comes with some risk, but it’s up to the trader to decide how much trouble to take. This guide will help you learn about the most liquid and exotic currency pairs and how to trade with them.
What is meant by exotic forex pairs?
There are different currency pairs (currency pairs are how forex is traded). Some are big ones that are easy to trade, while some of the smaller ones may take longer.
Quotes for exotic currency pairs include a primary currency (like the USD, EUR, GBP, JPY, etc.) and a currency from a growing country (like the SEK, TRY, ZAR, HUF, MXN, etc.).
On the forex exchange market, exotic currency pairs are less liquid than significant currency pairs and are more unpredictable than major Fx pairs.
Some examples of foreign currency pairs are USDSEK, USDNOK, EURSEK, EURNOK, GBPSEK, GBPNOK, USDMXN, EURMXN, USDZAR, EURZAR, etc.
Which exotic Forex pairs are the best to trade?
Liquidity is the rate at which an item can be sold or bought. If the deal happens often, the liquidity will be high because finding someone to buy or sell currency at the rate you want will be easy.
But there is less liquidity in exotic pairs because it can be hard to find a seller whose prices match yours. In big and minor currency pairs, on the other hand, there are a lot of transactions, which makes it easy to trade.
The most liquid foreign forex pairs, like USDSEK, USDNOK, USDMXN, GBPSEK, USDZAR, MXNJPY, and GBPTRY, are the best ones to trade.
During long trends, these pairs have high volatility, average spreads, and often the chance to make money. But you must keep your risk in check because distinctive pairs can move a lot and wipe out your account.
Risks associated with exotic pairs
Exotic currency pairs rely significantly on interest rates, the state of the country’s economy, foreign direct investment, and many others.
Before trading in exotic pairs, the first thing you should do is understand the danger. To do this, you need to know how these two countries relate to each other and how they affect each other.
Most traders from countries that are still growing trade exotic pairs. That gives them an advantage in understanding the country’s business and how it will affect trading.
There are a lot of currency pairs that are more volatile and risky to trade than other big or minor currency pairs. Also, unusual pairs are less liquid than major and minor pairs.
Bottom line
On the forex market, the “exotic” currency pairs group has the least amount of trades. When there is less traffic, there is more risk, especially if you are starting as a trader. Traders who know a lot about the important economic factors that affect a specific exotic coin often do well with it. It’s important to remember that the market is unstable and that trades can lead to losses.
