In trading instruments, traders are familiar with three categories of currency pairs, major pair, cross pair, and exotic pair. In this paper, we will review exotic pairs, which are rarely known by traders, especially novice traders.
Maybe beginner traders are more familiar with major pairs such as GBPUSD or EURUSD, but rarely know exotic pairs such as EURTRY.
Let to learn more about exotic pairs in this article.
What are exotic pairs in forex?
Globally, the countries in the world consist of developed countries, developing countries or emerging countries, and countries that are still underdeveloped.
If the major currency pairs are currency pairs from developed countries, on the other hand, exotic pairs are currency pairs that are juxtaposed with emerging country currencies that have a high rate of economic growth.
When you hear the term exotic pair, maybe your imagination is like exotic twin dancers. No, basically exotic pairs in forex consist of one major currency paired with an emerging country currency.
Although there are so many emerging countries, not all currencies of these countries are available on the broker’s trading platform. You should check the availability of exotic pairs at your broker.
Why exotic currency pairs?
Exotic pairs for newbies may be less attractive because they have weaknesses, are rarely traded, and have the possibility of low liquidity. In addition, the spread is high, causing the risk of trading exotic pairs to be higher.
However, exotic pairs also provide opportunities for traders, one of the reasons is that some emerging countries have high-interest rates. This attracts traders experienced use carry trades strategy.
Combinations of emerging market currencies that form exotic pairs such as South Africa Rand (ZAR), Swedish Krona (SEK), Turkish Lira (TRY), Singapore Dollar (SGD). These currencies are paired with major currencies such as the Euro(EUR) and US Dollar(USD). From the combination of these currency pairs, for example, it becomes USD/TRY, EUR/TRY, USD/SGD, or USD/ZAR.
Exotic pairs list
In general, emerging markets are countries with high economic growth compared to other countries besides developed countries.
Some well-known emerging markets in the forex market are Singapore, Norway, Sweden, Turkey, Czech Republic, Hungarian, Polish, Romanian, Russian, South African, Mexican, Israeli, and Thai. However, there are other emerging countries that are rarely known, such as Malaysia, Indonesia, the Philippines, etc.
The following is a list of exotic pairs quoting from the AXI blog:
- Australian Dollar/Norwegian Krone symbol pair AUD/NOK.
- /Australian Dollar/Polish Zloty symbol pair AUD/PLN.
- Australian Dollar/Swedish Krona symbol pair AUD/SEK.
- /Australian Dollar/Singapore Dollar symbol pair AUD/SGD.
- Canadian Dollar/Singapore Dollar symbol pair CAD/SGD.
- Swiss Franc/Swedish Krona symbol pair CHF/SEK.
- Swiss Franc/Singapore Dollar symbol pair CHF/SGD.
- Euro/Czech Republic Koruna symbol pair EUR/CZK.
- /Euro/Hungarian Forint symbol pair EUR/HUF.
- Euro/Norwegian Krone symbol pair EUR/NOK.
- /Euro/Polish Zloty symbol pairs EUR/PLN.
- Euro/Romanian Leu symbol pair EUR/RON.
- /Euro/Russian Ruble symbol pair EUR/RUB.
- Euro/Swedish Krona symbol pair EUR/SEK.
- /Euro/Singapore Dollar symbol pair EUR/SGD.
- Euro/Turkish Lira symbol pair EUR/TRY.
- /Euro/South Africa Rand symbol pair EUR/ZAR.
- British Pound/Czech Republic Koruna symbol pair GBP/CZK.
- /British Pound/Hungarian Forint symbol pair GBP/HUF.
- British Pound/Mexican Peso symbol pair GBP/MXN.
- /British Pound/Norwegian Krone symbol pair GBP/NOK.
- British Pound/Polish Zloty symbol pair GBP/PLN.
- /British Pound/Swedish Krona symbol pair GBP/SEK.
- British Pound/Singapore Dollar symbol pair GBP/SGD.
- /British Pound/Turkish Lira symbol pair GBP/TRY.
- Mexican Peso/Japanese Yen symbol pair MXN/JPY.
- Norwegian Krone/Japanese Yen symbol pair NOK/JPY.
- Singapore Dollar/Japanese Yen symbol pair SGD/JPY.
- Turkish Lira/Japanese Yen symbol pair TRY/JPY.
- South Africa Rand/Japanese Yen symbol pair ZAR/JPY.
- US Dollar/Czech Republic Koruna symbol pair USD/CZK.
- /US Dollar/ Hungarian Forint symbol pair USD/HUF.
- US Dollar/Israeli Shekel symbol pair USD/ILS.
- /US Dollar/Mexican Peso symbol pair USD/MXN.
- US DollarNorwegian Krone symbol pair USD/NOK.
- /US Dollar/Polish Zloty symbol pair USD/PLN.
- US Dollar/Romanian Leu symbol pair USD/RON.
- /US Dollar/Russian Ruble symbol pair USD/RUB.
- US Dollar/Swedish Krona symbol pair USD/SEK.
- /US Dollar/Singapore Dollar symbol pair USD/SGD.
- US Dollar/Thai Baht symbol pair USD/THB.
- /US Dollar/Turkish Lira symbol pair USD/TRY.
- US Dollar/South Africa Rand symbol pair USD/ZAR.
Most liquid exotic pairs
In general, exotic pairs have low liquidity, because in this instrument it is rare for traders to buy and sell, so it is difficult to find a suitable price which causes low liquidity.
While liquidity is very important for traders, where high liquidity provides better opportunities for profit.
The most liquid exotic pairs in the last ten years are USDSEK, USDNOK, USDMXN, GBPSEK, USDZAR, MXNJPY, GBPTRY.
You can also use Forex screener Tradingview social trading to find exotic pairs by selecting the exotic pair filter on the pair options. You can also add other important filters to find exotic pairs that match your criteria.
Best exotic pairs forex
You can open multiple charts on your platform to unlock exotic pairs. Then you can add a custom indicator to find out the price volatility from a bullish or bearish open price that makes high volatility.
If you understand US dollar trading, you may be able to choose an exotic pair with a USD base currency, for example, USD/TRY, USD/SGD, and so on.
Or maybe you are challenged with the GBP currency, which is highly volatile but often confuses price movements, you can choose GBP/TRY.
However, you should know that the broker is matter in this case because not all brokers provide complete exotic pair instruments on their platforms.
To reveal the best exotic pairs, the following references may be useful for you to trade on exotic pairs as best exotic pairs.
- JPY/NOK.
- AUD/MXN.
- GBP/ZAR.
- USD/THB.
- EUR/TRY.
Trading exotic pairs forex
When you are interested in trading exotic pairs, the first thing that is important to pay attention to is the cost of the spread, check your broker, and know the amount of spread on the exotic pair you are going to trade. It greatly affects the trading risk.
Then it is also important to identify a strong bullish or bearish market trend or tends to be sideways. Sideways conditions will leave the loss of high spread costs. If the trend is strong, it is possible to earn high returns on exotic pairs.
Furthermore, it is also important to learn about central bank interest rates and the pace of economic and diplomatic relations with developed countries.
Why does it matter? As happened to the Turkish Lira, when this country faced economic sanctions by the United States, the value of the Lira fell, causing exotic pairs such as USD/TRY and EUR/TRY to have a very strong upward trend.
And also when the Turkish central bank cut interest rates, the lira fell against major pairs USD and EUR.
Trading exotic pairs pros and cons
Pros
Exotic pair trading has its own advantages and disadvantages. Although the liquidity is low, the price volatility is high. As in the exotic EUR/TRY pair where the current price is 15,81857.
The price has five decimal digits, so in a matter of seconds, the price is very easy to change and increase the potential profit and loss.
Or another example Or on the EUR/NOK exotic pair whose current price at the time of writing is 10.02675. It also has five decimal digits and the price changes easily in seconds.
Cons
The risk of trading exotic pairs is higher when compared to the more liquid major pairs. This requires special knowledge related to the relationship of currency values to interest rates, political conditions, direct investment in emerging countries.
Another risk is the cost of high spreads. Why is the cost of spreads high on exotic pairs? As explained earlier, exotic pairs are less liquid, so brokers take higher spread fees. This pair is very risky, especially for novice traders.
You may be shocked after trying to open a new order when you see a higher floating loss when the order is active.
Final thought
Exotic pairs are currency pairs consisting of one major or minor currency and one currency from an emerging country. Exotic pairs are rarely traded by forex traders, so most brokers take high spread costs.
Potential profit from trading exotic pairs is faster than major pairs. Because it uses five-digit quotes, allowing prices to move in seconds.
In proportion to the potential profit, the risk of trading exotic pairs is also high. In addition to high spreads, there is also a risk of volatility, when going against the market trend.
Note: this article is for informational purposes only and does not constitute investment advice. Forex and crypto trading is risky. Each investor is responsible for their investment.
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