MXN – Forex Academy

Introduction

In this exotic forex pair, the AUD represents the Australian dollar, while the MXN – the Mexican Peso. Exotic currency pairs have higher volatility in the forex market when compared to the other major pairs. Here, AUD is the base currency, where MXN is the quote currency. It means that the AUD/MXN exchange rate shows the amount that 1 AUD can buy in terms of MXN. Let’s say that the exchange rate for the AUD/MXN is 15.0346; it means that 1 AUD can be exchanged for 15.0346 MXN.

AUD/HUF Specification

Spread

When you go long in the forex market, you buy the currency pair from your broker at a higher price than when you sell it. The spread in forex is the difference between these two. The spread for the AUD/MXN pair is – ECN: 2 pips | STP: 7 pips

Fees

Some forex brokers charge a commission for every trade on ECN type accounts, depending on the value of the trade. STP accounts do not incur any trading fees.

Slippage

Sometimes when you place a market order, your broker will fill it in with a different price. This is slippage in forex trading; it is caused by increased volatility and the speed at which your broker executes the trade.

Trading Range in the AUD/MXN Pair

The trading range analyzes the spread between the highest and the lowest price movements across multiple timeframes. The trading range analysis ranges from the minimum, average, to the maximum volatility across all timeframes. It is used to assess the potential profitability of a currency pair across all timeframes.

The 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 determine a larger 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.

AUD/MXN Cost as a Percentage of the Trading Range

Further analysis of profitability can be aided by analyzing the percentage of the total cost to the volatility. These costs are put in terms of percentages of the volatility on all timeframes.

ECN Model Account costs

Spread = 2 | Slippage = 2 | Trading fee = 1 | Total cost = 5

STP Model Account

Spread = 7 | Slippage = 2 | Trading fee = 0 | Total cost = 9

The Ideal Timeframe to Trade AUD/MXN Pair

For the AUD/MXN pair, the ideal trading timeframe appears to be the longer timeframes since trading costs are at their lowest here. We notice that the trading costs for the AUD/MXN pair decrease as the timeframes become longer. Also, note that at longer timeframes, the volatility is higher.

For traders wishing to trade the AUD/MXN pair for the shorter-term, timing their trades with when the volatility increases towards the maximum can help. More so, adopting the use of forex limit orders will lower the trading costs by ensuring there are no slippages.

ECN Account Using Limit Model Account

Total cost = Slippage + Spread + Trading fee = 0 + 2 + 1 = 3

Notice how using the forex limit order types reduces the overall trading costs across all timeframes. The maximum trading cost of the AUD/MXN pair, for instance, decreased from 84.75% of the trading range to 50.85%.

Introduction

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.

Understanding USD/MXN

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.

Spread

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

Fees

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.

Slippage

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!