USDMXN is the abbreviation for the US Dollar against the Mexican Peso. It is classified as an exotic currency pair that usually has high volatility and low trading volume. Here, the US Dollar (on the left) is the base currency, and the MXN (on the right) is the quote currency.
The market price of USDMXN represents the value of MXN that are required to purchase to one US Dollar. It is quoted as 1 USD per X MXN. So, if the market price of this pair is 18.7615, then this amount of MXN is required to buy one USD.
The difference between the bid and the ask price is referred to as the spread. Its value varies from the type of execution model of the broker.
ECN: 16 pips | STP: 17 pips
For every position a client takes from the broker, he must pay some fee on each. Note that there is no fee on STP accounts. However, there are few pips of fees on ECN accounts.
The difference between the price requested by the client and the price that was given by the broker is referred to as the slippage. Its value depends on the volatility of the market and the broker’s execution.
Trading Range in USD/MXN
Assessing the amount of money you will win and lose beforehand, in a particular timeframe is critical in trading. Below is a volatility table through which one can determine the minimum, average, and maximum profit/loss they can encounter in a specified timeframe.
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/MXN Cost as a Percent of the Trading Range
By applying the total cost to the above table, we can even determine the cost variation in a trade. The ratio between the two expressed in percentage will help us determine the ideal times of the day to trade the currency pair.
ECN Model Account
Spread = 16 | Slippage = 3 |Trading fee = 3
Total cost = Slippage + Spread + Trading Fee = 3 + 16 + 3 = 22
STP Model Account
Spread = 17 | Slippage = 3 | Trading fee = 0
Total cost = Slippage + Spread + Trading Fee = 3 + 17 + 0 = 20
The Ideal way to trade the USD/MXN
Comprehending the above tables is simple. The percentage values are directly proportional to the total cost of the trade. It is seen that the percentages are comparatively high on the min column and vice versa. Now, coming to the ideal time to enter the market, it would be when the volatility of USDMXN is somewhere around the average pip movement. Trading in such moments will ensure low costs as well as lower liquidity.
Furthermore, you reduce costs by placing orders using limit/pending orders instead of market orders. This will significantly bring down the total costs as the slippage will be zero at this point in time. I hope this article will help you trade this pair in a much efficient way. Cheers!