So, we’ve described what exotic currencies are and given some examples of them. However, how do you go about trading with such currencies? Here, we will continue our analysis to see how you should start trading with these exotic currencies.
Starting exotic pair trading
As we mentioned, this market can be kind of risky so be wary. The problem is that your stop loss has to often be quite wide, so you do not trigger it by accident. This would mean pulling out of the trade too early in many cases. If you think you can take the risk, great! The potential for profit is much higher. Do not feel fear if the currency is moving too much. This is quite normal for such economies. There may be a period of some volatility just before a massive shoot up the ladder.
Another thing to consider is the popularity of these currencies. For all the major currencies, there is always constant news about them. Practically a bombardment. For rarer currencies, not so much. Few people have an interest in them, so this is only natural. However, this means you have to do your due diligence. Find reliable sights beforehand. It may be that a google search is not quite enough in some circumstances. This is especially true in a world like Forex, where you have to almost constantly be trading.
Overall, then, you have to do your research beforehand. The volatility of these markets means you need to have a deeper understanding of the underlying effects. Learn about the economies of these currencies, and the economies that may affect them. Keep a close eye on the news at all times.
Thanks for continuing with us on our analysis. Next time, we will continue on how to trade exotic currencies, and include strategies.