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[Thorian]

Are exotic currency pairs suitable for day trading? The article mentions they are highly volatile so it sounds like they could be? And what are the most traded exotic pairs?

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[James Barra]

Hi Thorian,

Thanks for your message.

Exotics can be suitable for day trading but there are some key considerations and challenges to weigh up:

• Exotics tend to exhibit higher volatility than majors, providing opportunities to profit from significant price movements over a short period.
• Exotics tend to have lower liquidity than majors which may result in slippage (the difference between the requested and actual price). This can seriously affect day trading results.
• Exotics tend to have wider spreads and higher trading costs than majors. Again, this can really impact the profitability of short-term trading strategies.
• For these reasons, day traders often target more liquid, major currency pairs (EUR/USD, USD/JPY etc).
• Like day trading any currency pair, risk management is essential if you deal in exotics.

Among the most popular and traded exotic currency pairs are:

• USD/ZAR (US Dollar/South African Rand)
• USD/SGD (US Dollar/Singapore Dollar)
• USD/INR (US Dollar/Indian Rupee)
• USD/HKD (US Dollar/Hong Kong Dollar)
• EUR/TRY (Euro/Turkish Lira)

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[Thorian]

Do you have a full list of all exotics James?

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[James Barra]

Hi Thorian,

We don’t maintain an exhaustive list of all exotic currency pairs.

However, CMC Markets is the broker we’ve evaluated with the most extensive range of currency pairs, with more than 300, including a long row of exotics. If you open a demo account you can view all the available options.

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[GreenbackScalper]

Take a look at the list of exotics on TradingView – https://www.tradingview.com/markets/currencies/rates-exotic/

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[Thorian]

Good man cheers.

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[Omar_Rahl_4421]

You mention things like “inflation, GDP, employment, retail sales, trade balances” and so on can impact currency prices but do you have more information or examples of how these economic indicators can specifically effect market values?

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[James Barra]

Hi Omar_Rahl_4421,

Thanks for your message.

Hopefully the below helps answer your question.

• Inflation – Inflation can devalue a currency because it diminishes purchasing power. Deflation can have the opposite effect. Let’s say the US reports higher than forecasted inflation, the Fed may raise interest rates to tackle it, with higher interest rates enticing foreign investors seeking better returns, which in turn boosts demand for the US Dollar.
• GDP – Growing Gross Domestic Product (GDP) indicates a robust economy that can result in rising currency values. Let’s say there are reports GDP is growing in the Eurozone, you might see appreciation in the Euro as investors back the region’s economic outlook.
• Retail sales – Retail sales are a key component of GDP, concerned with consumer spending. Rising retail sales indicate a growing economy which may lead to currency appreciation. Let’s say the UK reports noticeably high retail sales, you may see a stronger GBP.
• Trade balances – A trade surplus (more exports than imports) often strengthens a currency while the reverse can weaken it. Let’s say India reports high demand for its goods, you may see a stronger INR as international buyers purchase rupees to pay for the exports.

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[Omar_Rahl_4421]

That’s what I mean, great. You may want to add that to the article for others.

Do you have the same sort of explanation for the impact of “employment” on currecncies too?

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[James Barra]

Hi Omar_Rahl_4421,

High employment often suggests a strong economy which can result in currency appreciation. Let’s say the US Department of Labor reports a rise in non-farm payrolls (closely monitored employment figures), the Fed may then increase interest rates, leading to a rise in USD.

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[Omar_Rahl_4421]

Thanks for taking the time to explain!

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[Mason]

Neat page.

This might be a stupid question but am I an idiot if I consider day trading forex WITHOUT using leverage? Do all FX day traders leverage positions?

I have about 10K to play with so not huge by any stretch but not nothing either. I’m more than willing to gradually build up my portfolio rather than shooting for the stars with massive trades and returns.

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[Christian Harris]

If you’re not trading a substantial amount (tens of thousands of dollars), your profits in forex trading without leverage will likely be small because daily price fluctuations tend to be minimal.

It’s safe to say that most day traders use leverage, as currencies usually move less than 1% in a single day.

Have you considered day trading stocks? Unlike the relatively stable currency markets, stocks tend to be more volatile, with daily movements of 5%, 10%, or even 20% on a strong trading day.

Trading stocks without leverage can offer significantly higher profit potential compared to forex.

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