Introduction
In this exotic forex pair, the AUD is the Australian Dollar, and the PHP is the Philippine Peso. Note that trading with such exotic pairs is accompanied by periods of high volatility compared to major forex pairs. The AUD is the base currency, while the PHP is the quote currency. Therefore, in forex trading, the price of the AUD/PHP represents the amount of PHP you can purchase using 1AUD. Say that the price of AUD/PHP is 34.057. It means that with 1 AUD, you can buy 34.057 PHP.
AUD/PHP Specification
Spread
In the forex market, when going long, you buy a currency pair from the broker at a “bid” price. When you go short, you sell the currency pair to the broker at the “ask” price. The difference between the two prices is the spread.
The spread for the AUD/PHP pair is – ECN: 10 pips | STP: 15 pips
Fees
Forex traders using ECN type accounts get charged a trading fee by their brokers depending on the size of their position. STP type accounts rarely attract any trading fees from the brokers.
Slippage
If you have ever opened a trade during periods of increased volatility, you will notice that your order price differs from the execution price. This difference is slippage. It can also be caused when your broker is slow to execute your order.
Trading Range in the AUD/PHP Pair
The trading range refers to the analysis of the fluctuation of a currency pair over various timeframes. With the trading range, we can determine volatilities from minimum to the maximum across all timeframes. This information will be useful in deciding profitability across these 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/PHP Cost as a Percentage of the Trading Range
The percentage of the trading range is when we take the total costs associated with trading a particular pair and express it as a percentage of the volatility. Below are the percentage of the trading range for ECN and STP accounts.
ECN Model Account costs
Spread = 10 | Slippage = 2 | Trading fee = 1
Total cost = 13
STP Model Account
Spread = 15 | Slippage = 2 | Trading fee = 0
Total cost = 17
The Ideal Timeframe to Trade AUD/PHP Pair
We can observe from the above analyses that longer timeframes produce higher volatilities. More so, as the volatility increases, the trading costs decrease. Therefore, shorter-term traders of the AUD/PHP pair experience higher trading costs than longer-term traders.
However, trading costs can be reduced if traders were to open their positions when the volatility is approaching the maximum. Notice that across all timeframes, the trading costs are lower when volatility changes towards the maximum. Furthermore, using forex limit order types can be used to lower trading costs. Such order types eliminate the slippage costs. Here’s a demonstration.
ECN Account Using Limit Model Account
Total cost = Slippage + Spread + Trading fee
= 0 + 10 + 1 = 11
By getting rid of the slippage costs, we have effectively lowered trading costs across all timeframes.