Home Beginners Forex Education Forex Assets Analyzing The GBP/SAR Exotic Currency Pair

# Analyzing The GBP/SAR Exotic Currency Pair

76
0

#### Introduction

In the Forex market, currencies are traded in pairs, and one currency is always quoted against the other. The abbreviation of GBP/SAR is British Pound Saudi Riyal. Here, the first currency GBP is the base currency, and the second one SAR is the quote currency.

#### Understanding GBP/SAR

We compare the value of one currency to another, and hence when we buy a currency pair, we are essentially buying the base currency and selling the quote currency. The market value of GBP/SAR determines the strength of SAR against the GBP, so if the exchange rate for the pair GBP/SAR is 4.7167, it means we need 4.7167 SAR to buy 1 GBP.

Trading the Forex market usually does not involve in spending a lot of commissions like the Stock market. Here, Forex brokers make a profit through spreads. The difference between the Bid and the Ask prices of an asset is called the spread. Some broker has the cost inbuilt into the buy and sell prices of the currency pair we want to trade instead of charging a separate fee. Below are the spread values of ECN and STP brokers for the GBP/SAR pair.

ECN: 40 pips | STP: 44 pips

#### Fees

A Fee is simply the charges we pay to the broker for executing a particular trade. The fee varies from the type of broker we use. For example, the fee on the STP account model is zero, but we can expect a few pips on ECN accounts.

#### Slippage

Slippage is the implementation of a trade at a price different from that requested by a trader. Slippage can either be positive (be additional profit) or negative (additional loss) and Mostly occurs when the market is volatile.

The trading range is used here is to measure the volatility of the GBP/SAR pair. The amount of money we will win or lose in a given amount of time can be assessed using the trading range table. The minimum, average, and maximum pip movement of the currency pair is represented in the trading range. This can be evaluated simply by using the ATR indicator combined with 200-period SMA.

Procedure to assess Pip Ranges

2. Set the period to 1
3. Add a 200-period SMA to this indicator
4. Shrink the chart so you can assess a significant period
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.

#### GBP/SARCosts as a Percent of the Trading Range

The cost of trade depends on the broker and differs according to the volatility of the market. This is because the trading cost includes slippage, fees, and the spread. The cost of variation in terms of percentage is given below. We will look into both the ECN model and the STP model.

#### ECN Model Account

Total cost = Slippage + Spread + Trading Fee = 3 + 40 + 5 = 48