Introduction
GBP Pound sterling, also known as the pound, is the official currency of the United Kingdom and many others. The sterling is the fourth most-traded currency in the forex market. Where in DKK is known as The krone and sometimes Danish crown. It is the official currency of Denmark, Greenland, and the Faroe Islands.
GBP/DKK is the abbreviation for the Pound sterling against the Danish crown. In the Forex, one currency is quoted against the other. Here, the first currency(GBP) is the base currency, and the second(DKK) is the quote currency. The GBPDKK is classified as exotic-cross currency pair.
Understanding GBP/DKK
In Forex, to find out the relative value of one currency, we need another currency to compare. The market value of GBPDKK determines the strength of DKK against the GBP that can be easily understood as 1GBP is equal to how much DKK, so if the exchange rate for the pair GBPDKK is 8.3430. It means that we need 8.3430DKK to buy 1 GBP.
If the value of the base currency goes down, the value of the quote currency goes up and vice versa.
Spread
Forex brokers have two different prices for currency pairs: the bid and ask price. The bid price is the selling price, and ask is the buy price.
The difference between the ask and the bid price is called the spread. The spread is how brokers make their money.
ECN: 39 pips | STP: 42 pips
Fees
A Fee is simply the commission we pay to the broker on each position we open. There is no fee on STP account models, but a few pips on ECN accounts.
Slippage
slippage refers to the difference between the trader’s expected price and the actual price at which the trade is executed. It can occur at any time but mostly happens when the market is fast-moving and volatile. Also, sometimes when we place a large number of orders at the same time.
Trading Range in GBP/HKD
The amount of money you will win or lose in a given amount of time can be assessed using the trading range table. This is a representation of the minimum, average, and maximum pip movement in a currency pair. This can be evaluated simply by using the ART indicator combined with 200-period SMA.
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 significant 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.
GBP/DKK Cost as a Percent of the Trading Range
The cost of trade mostly depends on the broker and varies based on the volatility of the market. This is because the total cost involves slippage and spreads apart from the trading fee. Below is the representation of the cost variation in terms of percentages. The comprehension of it is discussed in the following sections.
ECN Model Account
Spread = 39 | Slippage = 3 |Trading fee = 5
Total cost = Slippage + Spread + Trading Fee = 3 + 39 + 5 = 47
STP Model Account
Spread = 42 | Slippage = 3 | Trading fee = 0
Total cost = Slippage + Spread + Trading Fee = 3 + 42 + 0 = 45
Trading the GBP/DKK
The GBP/DKK is an exotic-cross currency pair and is a volatile market. For instance, the average pip movement on the 1H timeframe is only 333 pips. DKK is considered to be an emerging pair.
Note that the higher the volatility, the lower is the cost of the trade. However, this is not an advantage as it is risky to trade highly volatile markets. Also, the larger/smaller the percentages, the higher/lower are the costs on the trade. So, we can infer that the prices are higher for low volatile markets and high for highly volatile markets.
It is recommended to trade when the volatility is around the minimum values. The volatility here is low, and the costs are a little high compared to the average and the maximum values. But, if you’re priority is towards reducing costs, you may trade when the volatility of the market is around the maximum values.
