It really is beneficial to have a better understanding of the pair.
Is it better to avoid Exotic currency pairs? Why?
- Thread starter RobRoss
- Start date
Beginners should avoid exotic currency pairs because they are known for their volatile nature. Moreover, beginners should also focus on trading a single currency pair because trading multiple pairs would require multiple trading strategies, which can prove to be a challenging task for them.
Exotic pair if we don't understand the character of currency the risk so high, besides spread fee is the high, political and economic condition giving high impact to currency, as interest rate change. Traders that work on exotic pairs need to keep updating the hot news associate to currency.
I know a trader who is mainly using EUR/TRY trading pair mainly; but personally I didn’t use this exotic trading pair! As I see, major Forex pairs are relatively cost efficient than the exotic trading pairs! On the other hand, exotic pairs are full of unusual movements, my technical analysis doesn’t work on exotic pairs as like the major currency! That’s why I am avoiding exotic pairs till now!
I would put it this way: if you don't know how to trade exotic currency pairs, you'd better stay away from them.
The thing is that exotic currencies behave differently from the major ones. They can be characterized by the low liquidity and high volatility. I actually think that it is useful to know how to trade exotic pairs because of the fact that they hide lots of potential profits. Another thing is that it is much more complicated to predict the further movements of the prices just because of huge influence of fundamental factors. So, if you want to trade Chinese RMB, for example, you should know Chinese economy and politics very well in order to know how to react to these or those financial events. If you succeed, you'll have awesome profits, but be ready for the failures!
The thing is that exotic currencies behave differently from the major ones. They can be characterized by the low liquidity and high volatility. I actually think that it is useful to know how to trade exotic pairs because of the fact that they hide lots of potential profits. Another thing is that it is much more complicated to predict the further movements of the prices just because of huge influence of fundamental factors. So, if you want to trade Chinese RMB, for example, you should know Chinese economy and politics very well in order to know how to react to these or those financial events. If you succeed, you'll have awesome profits, but be ready for the failures!
Agreed because major pairs are highly liquid and less volatile as compared to the exotic pairs in my opinion.
Exotic pairs are less liquid compared to major and minor pairs, which is why most traders avoid them. Besides less liquidity, exotic pairs are also unpredictable due to the fragile nature of the countries they’re associated with. If you are interested in trading exotic pairs, then make sure to have a high margin in your trading account to detect any significant change in the price of the currency.
Exotic pairs are surely volatile, but those who understand the market well and monitor the price movements of these currency pairs diligently make profits. Beginners may find it hard to crack the puzzle of exotic pairs, so they should limit their trading to majors and minors in order to gain experience and maybe then, try their hands on exotic pairs.
If you are new to trading, then yes, it is better to avoid trading exotic currency pairs because they are the most unstable of all the currency pairs available in the forex market. You should focus on a single currency pair to avoid any confusion. Once you gain experience and start making consistent profits, then you can trade exotic pairs.