Choosing the pair of currency before trading is a crucial thing that must be controlled by the trader. The goal is to facilitate analysis to develop entry strategies according to the currency characteristics.
Broadly, the pair of forex currency is divided into three types, ie; Pair Major, Cross, and Exotics. Generally, traders will choose the currency of the Major Pair group because it has high liquidity and is considered safest to executed. This pair-pair is a combination between USD and other major currencies, such as EUR / USD, GBP / USD, AUD / USD, etc. Next, there is a pair or cross minor, which is a combination of major currencies other than USD, such as EUR / JPY, AUD / CHF, GBP / CAD, etc.
Then what about exotic pairs? It can be said, this currency pair consists of various other currencies paired with major currencies, such as USD / TRY, EUR / NOK, GBP / SGD, etc. Unforgotten, exotic pair consists of currency developing countries whose political and economic conditions are less stable or often volatile. That's why exotic pair is not recommended for beginners.
However, some exotic pairs have other sides that make it much more interesting for experienced traders. Well on occasion, this author will review some popular exotic pairs as well as trading strategies that can be used. What's that?
PRO CONSA AXTOTING Pair EXOTIC
Exotic pair has a characteristic of spread or expensive trading costs and extremes of extrication. Keep in mind, high volatility is usually very vulnerable to result in a loss in a short time especially for beginners.
But for professional traders, this high volatility is a great sum of a great. This is by the principle of trading in general, namely: «High-Risk High Return». If further described, here is a con of trading in the exotic pair:
Provide greater profit potential.
Some exotic pair has high-interest venues, so it is suitable for carrying Trade.
Has trends that tend to be stable and last longer.
Not all brokers provide exotic pairs.
Spreads and high trading costs.
High risk, so it is not suitable for beginners.
Popular Topics Popular Best Pulled Trader
The overall list of exotic pairs of certain amounts very much. But the point discussion, what is the most popular exotic pair to be destroyed? As reported from Blackwellglobal, it turns out there are only some exotic currency pairs that usually become a trade, namely:
- EUR / TRY (EURO / Turkish Lira)
- The euro is a single currency used by 19 EU members and became one of the major money-sized trades in the world after the US dollar. On the other hand, the Turkish Lira (TRY) is the currency of the developing country used in the Turkish country and the Republic of Turkey of northern Cyprus. In this case, the euro is the base currency while trying as a query currency.
The currency pair is one of the popular exotic pairs that is often earned in particular by fundamental traders. Eur / TRY movement is strongly influenced by fundamental factors such as the EU European geopolitics, the European Central Bank Monetary Policy (ECB), inflation data, to manufacturing data.
- GBP / ZAR (Pound Sterling / South African Rand)
- GBP / ZAR is the next popular exotic pair that provides high potential volatility and significant advantage. GBP is one of the major currencies that become the most of the most traders worldwide. On the other hand, South African Rand (ZAR) is considered the most important currency in the African continent moving in fluctuating.
When trading on this pair, it is strongly recommended that traders always observe the policy issued by the Bank of England (BOE), especially about interest rate policies. The increase in decreased interest rates by the British Central Bank has greatly impacted the volatility of this currency pair.
- AUD / MXN (Australian Dollar / Mexican Peso)
- The popular exotic pair is an Australian Dollar / Mexican Peso or abbreviated AUD / MXN. The Australian dollar is one of the favorite currencies that has a volunteer movement. AUD is also mentioned as a commodity currency because Australia is a country exporting many commodity assets, such as iron ore, beef, oil, gold, and other important commodities.
Meanwhile, Mexico is the country with the largest GDP sequence 15. The most recent Mexican earnings came from the export sector through a free trade agreement with more than 40 countries including the EU, Japan, Israel, Canada, and the United States. Thus, this exotic currency pair also has a high interest rate difference, so it is not surprising that it is often a target of the Carry Trade.
- USD / THB (US Dollar / Thailand Baht)
- The next popular exotic pair is the US dollar and the currency of the country from Southeast Asia Thailand. The US dollar is a widely heavy reserves curb while the Baht Thailand is one of the exotic currencies that have the best performance to date.
In addition, these two currencies appear very well when the US-China trade war and the global slowdown in 2019. For that, this pair is often used as a safe-haven asset among the exotic currency pair.
- Nok / JPY (Norwegian Krone / Japanese Yen)
- The latest popular exotic pair is the Norwegian krona versus Jen ya. This pair is also referred to as a combination of the most stable currency in the world. How can it be?
Norway is one of the most stable economies in Europe. Although the currency is classified as an exotic currency, Norwegian's forks developed well and have shown strong growth since the beginning of the industrial period. Norway is now known as one of the highest levels of the world's welfare.
On the other hand, Japan is a country that has a strong industrial base and is home to some motor vehicles, electronics, machinery, steel and metals, ships, chemicals, textiles, and processed foods. In addition to USD / THB, NOK / JPY is an exotic safe force Hama pair during the market of turmoil.
Popular exotic pair trading way
Almost all trading strategies can be applied to exotic pairs. However, some of the following trading strategies are very popular among traders and are considered effective when used in exotic pairs.
- Trend Following
- The most common trading technique is well known for exotic pairs is with the Trend Following Strategy or following the trend. The basic principle of this technique is to search for the entry position opportunities in the direction of ongoing trends; If the market is taking up to buy when it comes down then sell.
According to research results, exotic pair does not tend to have longer ranging duration, especially five popular exotic pair above. Therefore, so that traders can do more accusations entirely, it is strongly recommended to identify trends first; Is bullish, bearish, or sideways.
Then, traders can take advantage of technical indicators or tools available on trading platforms. Some Trend Following Strategies that can be tried includes Bollinger Bands indicator, moving average, Ichimoku, etc.
- Breakout Trading Strategy
- The next strategy for trading on popular exotic pairs is to take advantage of breakout. The occurrence of breakout is when the price succeeds in penetrating important levels, such as highs (high) or lowest (low), support resistance, demand demo can, Fibonacci, pivot point, to the psychological level. After a break of important levels will usually have a major movement of the reversal or forwarding trend further.
Before applying this technique, it is strongly recommended traders already really understand how to determine the important areas in advance. In this case, a mistake in determining important levels often raises the false breakout that affects the accuracy of trading signals.
- Range Trading
- A phenomenon that may often be faced by traders when exotic pair trading is a ranging condition or commonly known as sideways. Ranging Market usually occurs at the price of increased and decreased but not to be able to penetrate the Important Resistance level of important or make a breakout.
Thus, the entry can be done at the reversal points at the support and resistance level. Seller signals can be executed if there is a valid rejection in the resistance zone, while entry buy can be monitored in the area of the support zone rejection.
At the time of ranging, traders can also take advantage of some of the indicators combinations to search for ENTRY signals. In addition, it can also use the price action technique to observe the reversal candlestick patterns to get a more valid signal.
What are you worth noting when exotic pair trading?
Similarly, Major or Minor Pair, the exotic pair movement is also strongly influenced by fundamental factors, such as central bank policy, geopolitical instability, inflation reports, to foreign funds in foreign investors. In addition, exotic pair also tends to be less liquid, so most traders will pair it with major currencies to get greater liquidity.
Before deciding on trading on exotic pairs, the main thing that the traders need to have is the misunderstands, the extra capital, and the good management emancipation. The goal is to order the trader always ready to suppress all possible will. In addition, it is strongly recommended to have a clear trading plan and to be able to choose popular exotic pairs according to their respective trading style.
In addition to the five exotic pairs above, there are also trading with the US dollar pair vs. the Mexican peso that can be considered.