Trading Exotic Currency Pairs
As you’re well aware, currency pairs are divided into majors and exotics. The majors are the most liquid currencies bought and sold. These include the EUR, USD, GBP, JPY, AUD, CAD and NZD. However, there are more than 100 monetary unit pairs that you can invest in.Most traders tend to stay away from this latter group because brokers charge a much higher spread. And this is not a bad thing if the pair shows large movements. If it only moves a few pips there’s no room for profit; remember that you have to cover the cost or the spread before taking earnings. Trading currencies online is a great way to make money. But you have to watch how and where you invest.
Any time you trade exotics, make sure the technical analysis you implement works well with that particular pair. Most of these unusual currency combos conform to fundamental analysis. So let’s say you pick the Canadian Dollar and the Japanese Yen. If you’re a student of the market, you probably know about each of the countries’ economies. So you’re aware that Canada is a big oil producer, while Japan buys 90% of its crude oil from other nations. By watching the price of this commodity, you’ll be able to gage whether to buy or sell one of the currencies. Defining Forex pair correlation is another way by which to study the pairs. But again, apply caution when choosing unusual combinations and be mindful of other data affecting currencies.