Exotic currencies are those that are not widely traded or commonly known. They are typically from smaller or emerging economies and can be more volatile and risky than major currencies.
Some examples of exotic currencies include the Mexican peso, the Turkish lira, and the South African rand. These currencies can offer opportunities for traders looking to capitalize on price movements in less liquid markets. However, they can also be more volatile and prone to larger price swings. What are the 4 currencies? 1. The US Dollar (USD)
2. The Euro (EUR)
3. The British Pound (GBP)
4. The Japanese Yen (JPY)
Why do people trade exotic pairs?
When it comes to forex trading, there are a variety of strategies that traders use to try and profit from the market. Some traders focus exclusively on major currency pairs, while others trade a mix of majors and exotic pairs. So, what are exotic pairs and why do people trade them?
Exotic pairs are currency pairs that are not traded as frequently as the majors. As a result, they can be more volatile and present more opportunities for traders who are willing to take on more risk. While the majors tend to be more stable and liquid, exotic pairs can offer the potential for greater rewards – but also greater risks.
So, why do people trade exotic pairs? For some traders, the higher risks associated with these pairs are worth it in pursuit of the greater potential rewards. Other traders may simply prefer the challenge of trading less-followed markets. Whatever the reason, exotic pairs can be a viable option for those looking to add some diversity to their forex trading strategy.
How do you calculate pips in exotic pairs?
The first step is to determine the base currency. The base currency is the currency on the left of the pair and the quote currency is on the right. In most cases, the base currency is the currency of the country where the investor resides. For example, if an investor from the United States is trading the EUR/USD pair, the base currency is the EUR and the quote currency is the USD.
The next step is to find the pip value for the pair. The pip value is the fourth decimal place for most currency pairs, with a few exceptions. For example, the JPY has a pip value of the second decimal place. To find the pip value, divide one pip (0.0001 for most pairs) by the current exchange rate.
For example, if the EUR/USD exchange rate is 1.1719, then the pip value is:
0.0001 / 1.1719 = 0.00008498
The last step is to multiply the pip value by the number of pips that the investor wants to trade. For example, if an investor wants to trade 10,000 pips, then they would multiply 0.00008498 by 10,000 to get a trade value of €84.98.
What are exotic markets?
Exotic markets are those that don't trade the major currencies. The most common exotic currencies are the Mexican Peso, the Polish Zloty, and the South African Rand. These currencies are not as widely traded as the major currencies, so they can be more volatile and have wider spreads.
What is the world's most exotic?
There is no one answer to this question as the "most exotic" currency will depend on the individual trader's own preferences and trading style. However, some currency pairs that are often considered to be exotic include the USD/TRY (US Dollar/Turkish Lira), USD/ZAR (US Dollar/South African Rand), and USD/MXN (US Dollar/Mexican Peso). These pairs are typically considered to be exotic because they exhibit higher levels of volatility and are less liquid than major currency pairs. As such, they can offer opportunities for traders to make profits from price movements that are more pronounced than what is typically seen in the major currency pairs.