Tag: Lira

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Forex Assets

Trading The AUD/TRY Forex Exotic Currency Pair and Analysing The Costs Involved

Introduction

Introduction

Introduction

AUD/TRY is an exotic currency pair in the forex market. The AUD is the short form of the Australian Dollar and the TRY for Turkish Lira. Forex traders interested in such exotic pairs should be aware that trading them comes with high volatility compared to trading major forex pairs. In this exotic currency pair, the AUD is the base currency, while the TRY is the quote currency. Thus, the AUD/TRY price represents the amount of TRY that 1 AUD can buy. For instance, if the AUD/TRY pair’s price is 5.8362, it means that 1 AUD can buy 5.8362 TRY.

AUD/TRY Specification

Spread

In the forex market, your broker sells a currency pair to you at a higher price and buys it from you at a lower price. The value difference between these two prices is the spread. It is the primary way in which forex brokers earn their revenue.

The spread for the AUD/TRY pair is – ECN: 3 pips | STP: 8 pips

Fees

Forex traders with ECN account normally pay a trading fee to their broker whenever they open a position. This commission depends on the size of the trade, and not all forex brokers levy it. STP accounts do not have commissions.

Slippage

In forex trading, slippage refers to the price you expect your market order to be filled at and the price at which it is executed. The difference is a result of delays by your forex broker or high volatility.

Trading Range in the AUD/TRY Pair

The trading range refers to the analysis of the price fluctuation of a currency pair across various timeframes. The trading range shows the volatility in pips for a currency pair throughout the trading period ranging from minimum to maximum.

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/TRY Cost as a Percentage of the Trading Range

After determining the trading range, we can then determine the trading costs associated with these trading ranges. The total trading cost is expressed as a percentage of the pip volatility. Here are the trading costs for the AUD/TRY pair on both ECN and STP accounts.

ECN Model Account costs

Spread = 3 | Slippage = 2 | Trading fee = 1

Total cost = 6

STP Model Account

Spread = 8 | Slippage = 2 | Trading fee = 0

Total cost = 10

The Ideal Timeframe to Trade  AUD/TRY Pair

From these analyses, we have established that longer timeframes have lower trading costs while the shorter timeframes attract higher trading costs. Note that the highest trading costs coincide with periods of lower volatility.

Therefore, the ideal timeframe to trade the AUD/TRY pair would be on longer timeframes when volatility is the highest. For shorter-term traders, opening positions when volatility is above the average can potentially lower the trading costs. Furthermore, traders across all timeframes can lower their trading costs by using the forex limit order types. With these types of orders, the cost of slippage is removed.

Below is an example using the ECN account.

ECN Account Using Limit Model Account

Total cost = Slippage + Spread + Trading fee

= 0 + 3 + 1 = 4

Using the forex limit order types has lowered the trading costs across all timeframes. You can notice that the highest cost has reduced from 101.69% to 67.8%.

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Forex Assets

Examining The Volatility Of CHF/TRY Forex Exotic Pair

Introduction

Introduction

Introduction

The abbreviation of CHF/TRY is Swiss Franc, paired with the Turkish Lira. In this pair, CHF is the official currency of Switzerland and is also the fifth highly traded currency in the Forex Exchange market. In contrast, TRY stands for the Turkish Lira, and it is the official currency of Turkey. This pair is classified as an exotic pair.

Understanding CHF/TRY

In the Foreign exchange market, to determine the relative value of one currency, we need an alternative currency to evaluate. Hence, when we are buying a currency (base) we are simultaneously selling one (the quote currency). The market value of CHF/TRY helps us to understand the power of TRY against the CHF. So, if the trade rate for the pair CHF/TRY is 7.1972, it means to buy 1 CHF, we need 7.1972 TRY.

CHF/TRY Specification

Spread

Spread is the distinction between the ask-bit price that is set at the exchanges. Below are the spread values of the CHF/TRY currency pair in both ECN & STP accounts. The spread charges for ECN and STP brokers for the CHF/TRY pair can be found below.

ECN: 35 pips | STP: 40 pips

Fees

For every position, a trader enters the stockbroker charges some fee for it. Traders must know that this fee is charged only on ECN accounts and not on STP accounts.

Slippage

Slippage is the price difference between the trader’s execution and at which the broker executed the price. The difference is because of the high market volatility and slow execution speed.

Trading Range in CHF/TRY

A trading range is the interpretation of the volatility in CHF/TRY in several timeframes. The values are obtained from the Average True Range indicator. One can use the table as a risk management tool to identify the profit/loss that a trader is possessed.

Below is a table indicating the minimum, average, and max volatility (pip movement) on various timeframes.

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.

CHF/TRY Cost as a Percent of the Trading Range

The total cost of the trade fluctuates based on the volatility of the market. So, we must figure out the occasions when the costs are less to place ourselves in the market. Below is a table demonstrating the variant in the costs based on the change in the volatility of the market.

Note: The percentage rates represent the relative scale of costs and not the fixed costs on the trade.

ECN Model Account

Spread = 35 | Slippage = 5 | Trading fee = 8

Total cost = Slippage + Spread + Trading Fee = 5 + 35 + 8= 48

STP Model Account

Spread = 40 | Slippage = 5 | Trading fee = 0

Total cost = Slippage + Spread + Trading Fee = 5 + 40 + 0 = 45

The Ideal way to trade the CHF/TRY

Volatility and cost are the two components traders take into consideration for trading any security in the market. With the assistance of the above tables, let us evaluate these two factors to trade the CHF/TRY Forex pair.

As we can see, the pip variation is significantly high between the minimum volatility and the average volatility in each timeframe. As a day trader, our aim is to make income from the market’s pip movement. But, if there is hardly any movement in the price, it becomes tricky to make profits from the market. Thus, it is ideal to trade when the volatility is at the average value.

The cost of trade rises as the volatility decrease. They are inversely proportional. In other words, highly volatile markets have minimum costs. Though it is quite risky to trade markets with higher volatility, it can be considered by aggressive traders with optimal money management techniques in place as the costs are low. Hence, to retain a balance among the cost and volatility, traders may find trading occasions when the volatility is near the average values or a little above it.