Understanding Currency Pairs is one of the most fundamental parts of forex trading. Currency pairs come in a variety of shapes and sizes, including majors, minors, and exotics.
Exotic currency pairs vary from major currency pairs in that they have less liquidity than others on the market. Exotic currencies, on the other hand, are worth trading because of their distinctive price action and tactics.
Alternative or third-world currencies are terms used to describe exotic currencies. They can provide exciting chances in forex trading since they have a bigger potential for rewards than other currencies, but they also carry hazards.
In this post, we’ll go over all of the exotic currencies that may be traded on the foreign exchange market, as well as what makes them appealing to traders.
What is the definition of a currency pair?
The two currencies that are being exchanged are referred to as a currency pair.
If we were to trade GBP/USD in FX, for example, British Pounds and US Dollars would be coupled together as one trade unit.
Currency pairs in the forex market are made up of the base currency (also known as the transaction currency), which is the first currency in the pair, and the quote currency or counter currency, which is the second currency in the pair. The base currency is GBP, while the quote currency is USD.
Major currency pairs
Because of their popularity and increased liquidity, major Currency pairs are the most traded in the forex market. Because these currencies have big economies, they may be more liquid than other exotic currency pairs that do not share liquidity with major pairings and have the smallest spreads.
There are only seven significant Currency pairs, despite the fact that there are eight major currencies. A big FX pair is one that contains one of the main currencies and the US Dollar.
Pairs of minor currencies
Minor Currency pairs, often known as ‘crosses,’ are the second most traded in the forex market. Because small Currency pairs have less liquidity than large currency pairs, dealers will frequently make more forex deals using minor currencies in order to lower trading expenses.
The major currencies that do not contain the US Dollar are referred to as minor pairings. The Euro, Japanese Yen, and British Pound are the most popular minor Currency pairs.
What is the definition of an exotic currency pair?
In the forex market, exotic Currency pairs are the third most traded. One of the eight main currencies and a currency from a developing or emerging country are examples of these partnerships. Exotic against exotic pairings, like as NOK/TRY or TRY/RUB, are also popular among traders.
Exotic forex pairings might help you diversify your trading by giving you more options. Exotic currencies have a higher level of volatility, which increases the risk of trading them but also enhances the chances of discovering trading opportunities if the major FX pairings are unavailable. Furthermore, developing market currencies have a higher interest rate, making them more appealing for carry trades.
An exotic Currency pairs, for example, is produced when an exotic Currency pairs, such as the South African Rand (ZAR) or the Swedish Krona (SEK), is combined with a major currency, such as the Euro (EUR) or the US Dollar (USD) (USD). The Turkish Lira (TRY) and the Singapore Dollar (SGD) are two examples of exotic Currency pairs (SGD).
Exotic Currency pairs list
All exotic FX pairs available to trade with Marmara FX are shown in the table below.
- AUD/NOK (Australian Dollar/Norwegian Krone)
- AUD/PLN (Australian Dollar/Polish Zloty)
- AUD/SEK (Australian Dollar/Swedish Krona)
- AUD/SGD (Australian Dollar/Singapore Dollar)
- CAD/SGD (Canadian Dollar/Singapore Dollar)
- CHF/SEK (Swiss Franc/Swedish Krona)
- CHF/SGD (Swiss Franc/Singapore Dollar)
- EUR/CZK (Euro/Czech Republic Koruna)
- EUR/HUF (Euro/Hungarian Forint)
- EUR/NOK (Euro/Norwegian Krone)
- EUR/PLN (Euro/Polish Zloty)
- EUR/RON (Euro/Romanian Leu)
- EUR/RUB (Euro/Russian Ruble)
- EUR/SEK (Euro/Swedish Krona)
- EUR/SGD (Euro/Singapore Dollar)
- EUR/TRY (Euro/Turkish Lira)
- EUR/ZAR (Euro/South Africa Rand)
- GBP/CZK (British Pound/Czech Republic Koruna)
- GBP/HUF (British Pound/Hungarian Forint)
- GBP/MXN (British Pound/Mexican Peso)
- GBP/NOK (British Pound/Norwegian Krone)
- GBP/PLN (British Pound/Polish Zloty)
- GBP/SEK (British Pound/Swedish Krona)
- GBP/SGD (British Pound/Singapore Dollar)
- GBP/TRY (British Pound/Turkish Lira)
- MXN/JPY (Mexican Peso/Japanese Yen)
- NOK/JPY (Norwegian Krone/Japanese Yen)
- SGD/JPY (Singapore Dollar/Japanese Yen)
- TRY/JPY (Turkish Lira/Japanese Yen)
- ZAR/JPY (South Africa Rand/Japanese Yen)
- USD/CZK (US Dollar/Czech Republic Koruna)
- USD/HUF (US Dollar/ Hungarian Forint)
- USD/ILS (US Dollar/Israeli Shekel)
- USD/MXN (US Dollar/Mexican Peso)
- USD/NOK (US DollarNorwegian Krone)
- USD/PLN (US Dollar/Polish Zloty)
- USD/RON (US Dollar/Romanian Leu)
- USD/RUB (US Dollar/Russian Ruble)
- USD/SEK (US Dollar/Swedish Krona)
- USD/SGD (US Dollar/Singapore Dollar)
- USD/THB (US Dollar/Thai Baht)
- USD/TRY (US Dollar/Turkish Lira)
- USD/ZAR (US Dollar/South Africa Rand)
What do you need to know about exotic Currency pairs before you trade them?
The majority of developing market currencies have some characteristics. Changes in US interest rates and expectations, as well as overall risk appetite, have a big impact on them (e.g. in a risk-off environment, traders and investors will generally favour the safe haven currencies and move out of emerging market currencies).
Another consideration while trading exotics is that they are substantially less liquid than majors and have far more volatility.
What is the best way to trade exotic currency pairs?
Exotic Currency pairs are available to trade in Marmara FX. You receive MetaTrader 5 and over 40 currency pairs to trade when you open a live trading account with Marmara FX.
Perform due diligence on the currency pair on which you want to open a trade by conducting fundamental and technical research.
Steps to open a trade on an exotic forex pair
- Create a demo or live forex trading account
- Download MetaTrader 5
- Find the exotic currency pairs you wish to trade
- Click or tap on ‘New Order’
- You will then be prompted to specify the volume and type of execution you would like, and tap on ‘Next’ or ‘New Order’ to start again
- Add a stop loss or take profit if you wish and select ‘Buy or ‘Sell’ accordingly
Strategies for trading exotic currencies
There are several forex trading techniques accessible, but no one approach stands out as superior to the others. Depending on the market circumstances, the Currency pairs you’re trading, your trading plan and trading style, and the timeframe, each method has its own moment to shine.
Something that has worked well in the past may not perform as well in the future, so it is always a good idea to reevaluate your trading goals and techniques. The forex market is constantly changing, which is what distinguishes it as the world’s most widely traded financial market.
Before going out into the unknown, try to understand as many various trading tactics as possible and spend your time focused on a particular Currency pairs until you are well-equipped.
In the exotics market, there are a variety of trading strategies that may be roughly classified based on the time frame in which holdings are maintained. Here are some examples of trading styles:
Scalping Trading
Scalping trading is the most active type of trading since positions are held for only seconds or minutes at a time. Because fundamentals cannot effect such a short time frame, the method is purely based on technical analysis. It’s critical to choose an FX broker with minimal commissions and quick execution times because a large profit requires hundreds of little deals.
Day Trading
Day traders, like scalpers, will employ technical analysis unless a major geopolitical event occurs. Day traders often trade positions during the day and do not retain holdings overnight. To benefit from their transactions, they also demand typically quick execution and cheap commissions, which might occasionally result in a loss.
Swing Trading
Swing trading is the logical progression of trading styles. Positions are kept for a period of time ranging from a few days to a few weeks. Because both technical and fundamental analysis may impact price in this time range, the study can be a mix of the two. This can be a suitable trading method for FX traders wishing to enter the forex market part-time because positions are only entered and withdrawn once in a while.
Position Trading
The trading style with the largest time frame is this one. The posts are typically retained for months or even years. Fundamental research drives most forex position trading, which is similar to traditional stock trading. Your broker’s dependability and the fact that they won’t shut down for a long time should be the most crucial consideration here.
The advantages and disadvantages of trading exotic currency pairs
Exotic pair trading in forex has both advantages and disadvantages, and many experienced traders can tell you that they have seen the highs and lows in this segment of the market. One of the numerous advantages of forex trading in general is the chance to trade a wide range of exotic currencies across the world.
Before you begin trading exotic forex pairs, consider the following advantages and disadvantages:
Pros:
- Less market pressures – They tend to have a lesser connection with other financial assets like stocks and bonds, making them less susceptible to macroeconomic influences.
- Volatility – Exotic pairings may be much more volatile than majors and minors, which can be a positive thing or a bad thing depending on your perspective.
Cons:
- Less liquidity – The less money that moves about an exotic currency pairs, the more difficult it is to initiate and exit a deal at the price you desire.
- High spreads – To compensate for the greater spreads, more money may be necessary while trading exotics.
- Volatility – As previously said, higher volatility may be beneficial, but it can also be harmful, posing a significant danger of further losses.
- Devaluation risk – Exotics are vulnerable to large fluctuations in value when governments make policy changes without warning. Central banks or market developments can cause a developing country’s Currency pairs to devalue quickly.
Is it a good idea to trade exotic currencies?
Starting with exotic currencies is not the ideal option if you are relatively new to the field of currency pairs trading. They are far less liquid than the majors and minors, and their spreads are much wider.
To begin your forex trading career, it is best to trade currency pairs from the major and minor groups, since these pairings have greater transaction activity and lower spreads. Exotic pairings might be riskier for more experienced traders, but these risks can possibly pay off if you know what you’re doing.
See our page on what is forex trading to make sure you understand how the Forex market operates.
Which currency pairs should you trade exotic currencies against?
Exotic currencies can only be traded when they are traded against a major currency. The reason for this is that there isn’t enough liquidity in these tiny pairings, and finding someone willing to take the other side of your transaction would be tough.
It would also be difficult to locate a broker who provides a currency pair that includes two exotic currencies, and even if one did exist, the spreads would be rather wide.
Countries in or near Europe are often traded against the Euro, whilst other exotic currencies are typically traded against the US dollar. EUR/TRY (Euro/Turkish Lira) and USD/ZAR (US Dollar/South African Rand) are two examples.
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