EURCAD is the abbreviation for the currency pair Euro area’s euro and the Canadian dollar. This is a cross-currency pair, as it does not involve the US dollar. In EURCAD, EUR is the base currency, and CAD is the quote currency. The price of this pair basically tells the value of CAD w.r.t EUR.
The current market price of EURCAD determines the required Canadian dollars to purchase one euro. It is quoted as 1 EUR per X CAD. For example, if the CMP of EURCAD is 1.4700, it is as good as saying that 1.4700 CAD is needed to buy one EUR.
The algebraic difference between the bid price and the ask price set by the broker is known as the spread. Spread varies from time to time and broker to broker. The approximate spread value on an ECN account is 0.8, and on an STP account is 1.8.
For every position that a trader opens, there is some fee associated with it. And it depends on the type of account model. It is seen that there is no fee on STP accounts and a few pips on ECN accounts.
Slippage is terminology in trading, which, by definition, is the difference between the trader’s wished price and the real executed price. That is, the trader does not get the exact price he had intended for. There is some variation due to the volatility of the market and the broker’s execution speed. It usually varies from 0.5 to 5 pips on these minor currency pairs. The slippage is typically lesser on major currency pairs.
Trading Range in EUR/CAD
The trading range is an illustration of the minimum, average, and maximum pip movement in EURCAD. It determines the volatility of the market. The volatility of the market is a vital piece of information in trading, as one can assess the time that can be taken on each trade. And by applying more variables to it, one can determine the cost varies on the trade as well.
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.
EUR/CAD Cost as a Percent of the Trading Range
Cost as a percent of the trading range is a simple yet very effective application of the above volatility table. There is a cost on every trade you take. The total cost of a trade is the sum of slippage, spread, and trading fee. This total cost is divided by the volatility values and is expressed in terms of a percentage. And the percentage values are used to figure out the best times of the day to enter and exit a trade with marginal cost.
ECN Model Account
Spread = 0.8 | Slippage = 2 | Trading fee = 1
Total cost = Slippage + Spread + Trading Fee = 2 + 0.8 + 1 = 3.8
STP Model Account
Spread = 1.8 | Slippage = 2 | Trading fee = 0
Total cost = Slippage + Spread + Trading Fee = 2 + 1.8 + 0 = 3.8
The Ideal way to trade the EUR/GBP
To determine the ideal way of trading the EURCAD, let us first comprehend what the percentage means.
High percentage => High cost
Low percentage => Low cost
Min column => Low volatility
Max column => High volatility
From the table, we can infer that the percentages are high in the min column and low for the max column. So,
Min column => High percentage
Thus, Low volatility => High cost
Max column => Low percentage
Thus, High volatility => Low cost
It is not ideal during low volatility as costs are high. Also, trading during high volatility is not a good idea as it is quite risky. Hence, to have a balance between both volatility and cost, it is ideal to trade when the pip movement on the currency pair is at the average values.
Another simple hack to reduce the costs is to trade using limit orders instead of market orders. Doing so, the slippage will be automatically cut off from the trade, and the total cost will significantly reduce.