Best Exotic Currency Pairs to Trade
November 1, 2023
Long-term trading is conservative traders’ preference. These actors of the forex market usually would instead trade only exotic currency pairs because they consider it safer and more conservative. Exotic pairs are less volatile within the forex market, and they are long-term holders’ priority. More than conservative beginners get attracted to trading exotic currency pairs because they might find opportunities in long-term investments. Also, they may see them as attractive and very easy to manage. They can follow their movement with low knowledge, and they can gain expertise in their trading quickly. Therefore, Aron Groups advises the hottest exotic pairs for beginners, conservatives, and long-term investors.
Table of Contents
What is an exotic currency pair?
One pair of exotic pairs is a currency from a developing country, and the other pair is one of the currencies belonging to any other country with a currency. They are called exotic because the exotic term refers to the primitive currency of the developing countries. Traders welcome these currency pairs in the third level of their most traded pairs within the forex market. After all the definitions, it is clear that we might observe a sign for one of the currencies, like the dollar, Euro, Pounds, on one side of the equation and any other currency sign on the other side.
What are some of the most traded exotic pairs in today’s forex market:
- Euro/Turkish Lira (EUR/TRY)
- Euro/Hungarian Forint (EUR/HUF)
- Euro/Polish Zloty (EUR/PLN)
- US Dollar/Turkish Lira (USD/TRY)
- US Dollar/South Africa Rand (USD/ZAR)
- US Dollar/Swedish Krona (USD/SEK)
- US Dollar/Russian Ruble (USD/RUB)
- US Dollar/Chinese Offshore Yuan (USD/CNH)
- US Dollar/Czech Koruna (USD/CZK)
- US Dollar/Mexican Peso (USD/MXN)
- US Dollar/Danish Krone (USD/DKK)
- US Dollar/Hong Kong Dollar (USD/HKD)
- US Dollar/Hungarian Forint (USD/HUF)
- US Dollar/Singapore Dollar (USD/SGD)
- US Dollar/Norwegian Krone (USD/NOK)
What are the advantages of trading exotic pairs?
In fact, as mentioned before, their main advantages are for beginner traders, conservatives, and long-term holders. However, there is a list of advantages as following through experts in Aron Groups broker:
- Traders can master trading them quickly;
- Long-term investors can rely on holding them to get more benefits;
- They are profitable and money-maker;
- They are good choices for people who have been investing in different fields, and forex is one of them;
What are the disadvantages of trading exotic pairs?
Most traders believe that beginners should start with exotics, but it is not riskless and perfect as well. Some reasons are:
- For a trader who is used to scalp trading, they are not proper;
- They are not liquid without experiencing the market depth; however, most traders prefer higher volatility with lower liquidity to avoid some forex risks;
- Whenever some data in the world of economy is transferred and found necessary, it may affect the exotic pairs’ lives and push them to be highly volatile;
- Exotic pairs are relatively more expensive. Most of the time, a lack of liquidity happens in this world which is because of the spread of a bid-ask spread.
It is wise to get a good understanding of every term and condition before starting to trade CFDs, which are relatively riskier than exotic pairs.
Getting enough information and data that affect exchange rate factors within the forex market should be done prior to the other acts and trades.
Do exotic currency pairs demand more risk factors?
Comparing the major currency pairs, fewer traders are trading exotic currencies, so significant currency pairs are actors’ and traders’ favorite preferences. As a result, the market flaw persuades more and more fluctuations and ups and downs to these pairs. Every news in financial markets and countries’ economic conditions oppose more and more diversity and currency to the market.
The lower number of traders who focus on trading exotic pairs causes fewer reactions and fluctuations in this market. Traders find movements just when there are some fundamental changes within the market or when one of the supportive countries is experiencing an impressive status and condition. This relatively small circle of trades shifts fast, and they might experience extreme price movements.
How does trading exotic currency pairs work with MetaTrader?
Trading platforms with MetaTrader facilities suggest that their participant traders may be able to enhance their trading performance by boosting the MetaTrader platform. However, have the following points in mind:
- Major currencies belong to compelling economies;
- Major currencies’ source countries are politically and economically stable;
- The majority of market players trust major currencies, and their origin countries pay low-interest rates on their issued debt;
- Smaller or developing economies cannot support their currencies like the above-mentioned powerful countries. However, their weak stability and less robust economy persuade higher risk levels for them.
Russia, despite its giant economy, has encountered a great wave of shock, economic storms, and adverse factors during the last months, which mainly include:
- Expensive military battles and conflicts;
- Apparent instability, especially in political matters;
- Exploded interest rates;
- Increased interest payments in comparison with tax rates.
All the mentioned factors caused the ruble to face significant instability and fluctuation. Russian Central Bank made a great attempt to keep the ruble in a more stable place and to support it against the market waves. Still, as we can consider now, it ultimately had to accept the lower value of its currency compared to the past couple of years. One of the Russian Central Bank’s efforts was expending vast amounts of foreign currency reserves a couple of times and raising the number of rates to support the Russian ruble. However, considering everything and despite all these calculations and measures, the Russian ruble has kept declining in value and price.
Are there any exotic currency pairs that are worth the trading risk?
It is not an easy question to answer; exotic pairs are easy to trade, and it is risky. If a trader has a canalized perspective and uncanny strategies, a more expert consultant is necessary for them to help them enhance their profile, considering their specific needs. However, some traders believe that they can fulfill their short-term or long-term needs by using more standard options, and some others aim to perform more exotic options.
It seems that only traders with specific needs can robust their profile by adding some exotic options. Having a positive view of exotic options requires knowledge, and any small mistake in this zone may result in an expensive mistake.
Final review on exotic currency pairs
The most advisable treat for a beginner trader in the forex market is to keep the safe side and act conservatively and cautiously. The newcomer to the market should consider that the existence of a phenomenon with characteristics of exotic financial pairs doesn’t mean that they can trade freely. Maybe a trader considers an exotic currency pair exciting and interesting, but they should not forget that market risks are inevitable. So, any trader should learn about decreasing the risks by settling risk management strategies in their trading style.
Practicing trading strategies through some demo accounts is an excellent way to find a safe corner within the forex market.