Tag: Forex Exotics

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Forex Assets

Understanding The Fundamentals Of AUD/KES Forex Currency Pair

Introduction

Introduction

Introduction

In the AUD/KES pair, the AUD represents the Australian Dollar while the KES is the Kenyan Shilling. When buying and selling this exotic currency pair, forex traders should expect instances of high volatility. In the AUD/KES pair, AUD is the base currency, and KES is the quote currency. The price attached to this pair is the amount of KES that 1 AUD can buy. For example, if the price of AUD/KES is 76.399, it means that if you have 1 Australian Dollar, you can buy 76.399 Kenyan Shillings.

AUD/KES Specification

Spread

When you want to buy a currency pair in forex trading, you buy it from the broker. If you sell the pair, you sell it to the broker. The difference between these two prices is the spread. The spread for the AUD/KES pair is – ECN: 25 pips | STP: 30 pips

Fees

Most brokers charge a commission when you open a position. This commission varies from broker to broker and also depends on the size of your position. STP accounts are usually commission-free.

Slippage

In times of high volatility, or when your broker delays executing a trade, you will notice that the price at which you open a position is different from the exertion price. This is slippage in forex trading.

Trading Range in the AUD/KES Pair

In forex trading, trading range refers to the fluctuation in a currency pair’s price across different timeframes. Analysis of the trading range provides a powerful tool for deriving the volatility of a currency pair.

The Procedure to assess Pip Ranges

  1. Add the ATR indicator to your chart
  2. Set the period to 1
  3. Add a 200-period SMA to this indicator
  4. Shrink the chart so you can determine a larger period
  5. Select your desired timeframe
  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.

AUD/KES Cost as a Percentage of the Trading Range

The total trading cost involved in buying and selling a currency pair includes the spread, slippage costs, and brokers’ fees. Using the total trading costs, we can establish the percentage costs of a currency pair in pips.

ECN Model Account Cost

Spread = 25 | Slippage = 2 | Trading fee = 1 | Total = 28

STP Model Account Cost

Spread = 30 | Slippage = 2 | Trading fee = 0 | Total cost = 32

The Ideal Timeframe to Trade the AUD/KES

These analyses show that trading the AUD/KES pair on larger timeframes carries lower costs than smaller timeframes. Notice that on longer timeframes, volatility is higher. We can thus say that higher volatility corresponds to lower costs. For both the ECN and the STP accounts, costs are highest when volatility is at four pips and lowest when volatility is 737.1 pips.

To determine the ideal trading will depend on your trading style. Generally, longer-term traders enjoy low costs for both types of accounts. For the shorter-term traders, waiting for when volatility is at the ‘maximum’ will help lower the costs. Traders can also use forex limit orders to lower trading costs since using such orders eliminates slippage. Here’s one example using the ECN account.

Total cost = Slippage + Spread + Trading fee = 0 + 25+ 1 = 26

With no slippage costs, notice how costs have significantly dropped. The highest cost for the AUD/KES pair has dropped from 474.58% to 440.68%.

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Forex Assets

Trading The CAD/ZAR Forex Cross Currency Pair & Analyzing The Costs Involved

Introduction

Introduction

Introduction

The CAD/ZAR is an Exotic forex currency cross. CAD represents the Canadian Dollar, and the ZAR corresponds to the South African Rand. CAD is the base currency in this pair, while the ZAR is the quote currency. This pair’s exchange rate shows the value of the ZAR, which is equivalent to 1 CAD. If the pair’s exchange rate is 12.7969, it means that 12.7969 ZAR is equivalent to 1 CAD.

CAD/ZAR Specification

Spread

The spread in forex is calculated by subtracting the bid price from the asking price. Brokers determine the spread since it’s their primary source of revenue. Below is the spread charges for ECN and STP brokers for CAD/ZAR pair.

ECN: 39 pips | STP: 44 pips

Fees

Forex traders with the ECN type accounts have to pay a commission to their brokers for every position they open. Brokers do not charge any trading fees on STP accounts.

Slippage

The difference between the trade price preferred by a trader and the broker’s execution price is the slippage. In forex, slippage depends on market volatility and the speed at which the broker executes the trade.

Trading Range in the CAD/ZAR Pair

The trading range is best described as the analysis of how the exchange rate of a currency fluctuates across different timeframes. This analysis will help to estimate the expected returns from trading a particular currency pair. If, for example, on the 1-hour timeframe, the volatility of the CAD/ZAR is ten pips, a trader can expect to gain or lose $78. The trading range for the CAD/ZAR pair is shown below.

The Procedure to assess Pip Ranges

  1. Add the ATR indicator to your chart
  2. Set the period to 1
  3. Add a 200-period SMA to this indicator
  4. Shrink the chart so you can determine a larger period
  5. Select your desired timeframe
  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.

CAD/ZAR Cost as a Percentage of the Trading Range

To make an informed risk management decision when trading the CAD/ZAR pair, we can analyze how the trading costs vary across different timeframes with different volatilities. Here are the cost analyses for the CAD/ZAR pair for both ECN and STP accounts.

ECN Model Account

Spread = 39 | Slippage = 2 | Trading fee = 1

Total cost = 42

STP Model Account

Spread = 44 | Slippage = 2 | Trading fee = 0

Total cost = 46

The Ideal Timeframe to Trade CAD/ZAR

We can notice that shorter timeframes have higher trading costs than the longer timeframes for both the ECN and the STP accounts. Also, across all timeframes, the trading costs reduce as the trading range of the CADZAR pair increases from minimum to maximum.

Although longer-term traders enjoy lesser trading costs, intraday traders can reduce their trading costs by trading when the volatility ranges between medium to the maximum. We can also further reduce the trading costs by implementing forex limit orders, which ensures that slippage does not affect your prices. Here is how trading costs can be reduced using forex limit orders.

ECN Account Using Limit Model Account

Total cost = Slippage + Spread + Trading fee

= 0 + 39 + 1 = 40

Using limit orders has significantly reduced trading costs. For the CAD/ZAR pair, the highest cost has been reduced from 711.86% of the trading range to 677.97%.

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Forex Assets

Analyzing The CAD/DKK Forex Exotic Currency Pair

Understanding CADDKK

Understanding CADDKK

Understanding CADDKK

CADDKK is an exotic currency pair where CAD is the major currency Canada and DKK is the currency of Denmark. In this currency pair, CAD is the first currency, and DKK is the quote currency.

The price of CADDKK determines the value of DKK that is equivalent to one CAD. We can term it as 1 CAD per X amount of DKK. For example, if the CADDKK pair’s value is at 4.7712, we need almost 4.7712 DKK to buy one CAD.

CADDKK Specification

Spread

When we subtract the Bid price and the Ask price, we will find the Spread. Spread is a trading cost that is controlled by the broker. Therefore, traders don’t have to do anything with this. This value changes with the change in execution.

Spread on ECN: 19 pips | Spread on STP: 24 pips

Fees

Trading fees in the forex market is the cost that the broker takes from traders. It is automatically deducted from traders’ trading account. Note that a few pips charges on ECN accounts but there is no fee on STP.

Slippage

Spread is the difference between the execution level and the open price level when it is an excessive level of volatility in the price. Market volatility and execution speed of your broker mainly contributes to the degree of slippage.

Trading Range in CADDKK

Procedure to assess Pip Ranges

  1. Add the ATR indicator to your chart
  2. Set the period to 1
  3. Add a 200-period SMA to this indicator
  4. Shrink the chart so you can assess a large time period
  5. Select your desired timeframe
  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.

CADDKK Cost as a Percent of the Trading Range

With the volatility, values provide an indication of how the cost varies with the change of volatility. We got the ratio between the cost and volatility and converted into percentages.

ECN Model Account 

Spread = 19 | Slippage = 5 | Trading fee = 8

Total cost = Spread + Slippage + Trading Fee

= 19 + 5 + 8

Total cost = 32

STP Model Account

Spread = 19 | Slippage = 5 | Trading fee = 0

Total cost = Spread + Slippage + Trading Fee

= 19 + 5 + 0

Total cost = 24

The Ideal way to trade the CADDKK

The CADDK is an exotic currency pair with stable volatility in the price. Therefore, it may provide a decent movement even in intraday trading. The percentage of values did not move above 64%. Therefore, we can say that that CADDKK is nicely tradeable even if in the lower timeframe. However, the trading risk is an essential factor that most of the traders should consider while making a trading decision.

Overall all traders should trade when the cost is at an average value. The increase in volatility is risky for the possibility of unwanted stop loss hit, while the decrease in volatility might make trading worthless. To reduce the cost, furthermore, you can place either a ‘limit’ or ‘stop’ order. In this case, there will be no slippage, and in this example, our total cost will be reduced by five pips.

STP Model Account (Using Limit Orders)

Spread = 19 | Slippage = 0 | Trading fee = 0

Total cost = Spread + Slippage + Trading Fee

= 19 + 0 + 0

Total cost = 19