USDRON is the abbreviation for the US Dollar against the Romanian Leu. This pair comes under the roof of emerging currency pairs. The volume in this pair is pretty low, and the volatility is high. Here, the US Dollar is referred to as the base currency and the RON the quote currency.
The fluctuating price in the exchange market specifies the value of RON equivalent to one USD. It is quoted as 1 USD per X RON. For instance, if the market price of this pair is 4.4723, then about 4½ RON is required to buy one US Dollar.
Spread is the difference between the bid and the ask prices set by the broker. It is not the same with all brokers. It also varies from the type of execution model used by the broker.
ECN: 19 pips | STP: 21 pips
The fee is the commission that is paid to the broker on each position you take. This, too, varies from the type of execution model. Typically, there is no fee on STP accounts. However, there are a few pips of fee on ECN accounts.
Slippage is the difference between the price requested by the client and the price he actually got from the broker. This happens only on market orders. The primary reasons for its occurrence are,
Broker’s execution speed
Trading Range in USD/RON
A trading range is the representation of the pip movement in a currency pair for different timeframes. With these values, we can determine the gain or loss in a trade for a specified time frame. All that must be done is, multiply the required value from the below table with the pip value. This will yield the profit/loss for one standard lot.
Procedure to assess Pip Ranges
- Add the ATR indicator to your chart
- Set the period to 1
- Add a 200-period SMA to this indicator
- Shrink the chart so you can assess a large time period
- Select your desired timeframe
- Measure the floor level and set this value as the min
- Measure the level of the 200-period SMA and set this as the average
- Measure the peak levels and set this as Max.
USD/RON Cost as a Percent of the Trading Range
Apart from assessing the profit or loss on a trade, we can also determine how the cost varies as the volatility changes. Below is a tabular representation of the same.
ECN Model Account
Spread = 19 | Slippage = 3 |Trading fee = 3
Total cost = Slippage + Spread + Trading Fee = 3 + 19 + 3 = 25
STP Model Account
Spread = 21 | Slippage = 3 | Trading fee = 0
Total cost = Slippage + Spread + Trading Fee = 3 + 21 + 0 = 24
The Ideal way to trade the USD/RON
Trading emerging currency pairs is different from trading major and e pairs. This pair’s high volatility and low trading volume make it infeasible to trade any time during the day. So let’s take some info out from the above tables and try finding the ideal times to enter this pair.
From the table, it can be ascertained that the percentage values are high in the min column and pretty low in the max column. This means that the total costs on the trade increases as the volatility decreases. So, to have equilibrium between the two, it is perfect to enter during those times when the volatility is around the average values. This will ensure both sufficient volatility and affordable costs.
Another simple technique to reduce total costs is by trading using limit and stop orders instead of market orders. In doing so, the total costs will reduce significantly as the slippage will not be considered for limit/stop orders. The reduction in the costs is represented in the below table as follows.