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Is it better to avoid Exotic currency pairs? Why?
- Thread starter RobRoss
- Start date
For new traders, yes! It is good to avoid exotic currency pairs because newcomers can’t stand strong emotionally to the huge price fluctuations but experienced traders should definitely add exotics to their portfolio. Exotic pairs can be really profitable because they move a lot. I know volatility is risky but who benefits from a currency which doesn’t move?
It is good for beginners to stay away from exotic forex pairs till the time you gain some experience and emotional control by trading major pairs that show comparatively fewer fluctuations. But after that, you should definitely add exotic pairs to your portfolio. Because they are highly volatile, you can expect them to provide you with more trading opportunities, and hence, have more chances of making profits. Moreover, some of these currencies are from emerging markets that have more potential to grow.
i generally avoid to trade exotic pairs , because dont feel comfortable at all but in demo trade sometimes.
generally traders choose their currency pair according to their knowledge and experience , i always like to trade with Majors.
GBP/USD i am trading right now.
GBP/USD i am trading right now.
Exotic currencies are thinly traded that make them highly illiquid and extremely volatile. The higher bid ask spread makes it all the more expensive. If you are very experienced and looking for diversification, exotic currencies can be a part of your trading. Else, you should try to stick to the pairs with high trading volume.
The factors which move major pairs are hugely different from the factors which move exotic pairs. The major pairs depend upon the strength of the economy as well as interest rates differential, however exotic pairs are affected by political events. Any political instability can cause the currencies to depreciate rapidly. As exotic currencies are related to emerging market conditions, it is hard to predict the price changes.
Not really! In fact, exotic currency pairs have the most chances of letting you make money. But since they are highly volatile, you may have a tough time making money by trading them. You need a deep understanding of the currency pairs and proper market analysis to check the price directions and make money with them.