Home Beginners Forex Education Forex Assets Analyzing The ‘CHF/AED’ Forex Exotic Pair

Analyzing The ‘CHF/AED’ Forex Exotic Pair

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Introduction

CHF/AED is the short form for the Swiss Franc against the United Arab Emirates Dirham. It is considered an exotic currency pair. Currencies are always traded in pairs in the Forex market. The main currency in the pair is considered the base currency, while the sequential one is the quote currency.

Understanding CHF/AED

The market value of CHF/AED determines the value of AED required to buy one Swiss Franc. It is priced as 1 CHF per X AED. Hence, if the market price of this pair is 3.8835, these many United Arab Emirates Dirham units are necessary to buy one CHF.

Spread

The spread is the distinction between the ask-bid price. Mostly, these two prices are set by the stockbrokers. The gap between the pip values is through which brokers generate revenue. Below are the ECN & STP Spread values of CHF/AED pair.

ECN: 19 pips | STP: 24 pips

Fees

The fee is the minimum commission you pay to the broker on every single spot you open. There is no fee to be paid on STP accounts, but a few additional pips on ECN accounts.

Slippage

Slippage is the distinction between the price at which the trader implemented the trade and the original price he got from the broker – this changes based on the volatility of the market and the broker’s implementation speed.

Trading Range in CHF/AED

The trading range table will help you determine the amount of money that you will win or lose in every timeframe. This table signifies the minimum, average, and maximum pip movement in a currency pair.

Procedure to assess Pip Ranges

  1. Add the ATR indicator to your chart
  2. Set the period to 1
  3. Add a 200-period SMA to this indicator
  4. Shrink the chart so you can assess a large time period
  5. Select your desired timeframe
  6. Measure the floor level and set this value as the min
  7. Measure the level of the 200-period SMA and set this as the average
  8. Measure the peak levels and set this as Max.

CHF/AED Cost as a Percent of the Trading Range

The price of the trade alters based on the volatility of the market. Hence, the total cost comprises slippage and spreads, excluding from the trading fee. Below is the analysis of the cost difference in terms of percentages.

ECN Model Account

Spread = 19 | Slippage = 5 |Trading fee = 8

Total cost = Slippage + Spread + Trading Fee = 5 + 19 + 8 = 32 

STP Model Account

Spread = 24 | Slippage = 5 | Trading fee = 0

Total cost = Slippage + Spread + Trading Fee = 5 + 24 + 0 = 29

Trading the CHF/AED

The CHF/AED is not a very volatile pair. For example, the average pip movement on the 1H timeframe is only 42 pips. If the volatility is more significant, then the cost of the trade is low. Nevertheless, it involves a higher risk to trade highly volatile markets.

Also, the higher/lesser the proportions, the greater/smaller are the costs on the trade. We can then determine that the costs are higher for low volatile markets and high for highly volatile markets.

To reduce your risk, it is recommended to trade when the volatility is around the minimum values. The volatility here is low, and the costs are slightly high, corresponding to the average and the maximum values. But, if the priority is towards reducing costs, you could trade when the volatility of the market is near the maximum values.

Benefits on Limit orders

For orders that are implemented as market orders, there is slippage applied to the trade. But, with limit orders, there is no slippage valid. Only the spread and the trading fees will be accounted for estimating the total costs. Therefore, this will bring down the cost noticeably.

STP Model Account (Limit Orders)

Spread = 24 | Slippage = 0 | Trading fee = 0

Total cost = Slippage + Spread + Trading Fee = 0 + 24 + 0 = 24

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