Home Beginners Forex Education Forex Assets Trading Costs Involved While Trading The ‘CHF/SEK’ Forex Exotic Pair

Trading Costs Involved While Trading The ‘CHF/SEK’ Forex Exotic Pair

34
0

Introduction

The acronym of CHF/SEK is Swiss Franc, paired with the Swedish Krona. In this exotic Forex pair, CHF is the official currency of Switzerland and is also the fifth highly traded currency in the Forex market. In contrast, SEK stands for the Swedish Krona, and it is the official currency of Sweden.

Understanding CHF/SEK

In the Forex market, to ascertain the relative value of one currency, we need an alternate currency to assess. The market value of CHF/SEK helps us to understand the power of SEK versus the CHF. So, if the trade rate for the pair CHF/SEK is 9.8418, it means to buy 1 CHF, we need 9.8418 SEK.

CHF/SEK Specification

Spread

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

ECN: 45 | STP: 50

Fees

For every place, a trader enters the broker charges some fee for it. A trader must know that this fee is applicable on ECN accounts only and not on STP accounts.

Slippage

Slippage is the price variation between the trader’s execution and at which the broker implemented the price. The variance is due to high market volatility and slow execution speed.

Trading Range in CHF/SEK

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

Below is a table explaining the minimum, average, and max volatility (pip movement) on a variety of 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/SEK Cost as a Percent of the Trading Range

The entire cost of the trade varies based on the volatility of the market. So, we must find out the instances when the costs are less to place ourselves in the market. Below is a table explaining variation in the costs based on the change in the market volatility.

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

ECN Model Account

Spread = 45 | Slippage = 5 | Trading fee = 8

Total cost = Slippage + Spread + Trading Fee = 5 + 45 + 8= 58

STP Model Account

Spread = 50 | Slippage = 5 | Trading fee = 0

Total cost = Slippage + Spread + Trading Fee = 5 + 50 + 0 = 55

The Ideal way to trade the CHF/SEK

The two components a trader should consider while trading any security in the markets are – Volatility & Cost. With the help of the above tables, let us evaluate these two factors to trade the CHF/SEK ideally.

We can see that the pip difference is substantially high among the minimum volatility and the average volatility in every timeframe. For a day trader, the objective is to make revenue from the pip movement of the market. But, if there is barely any pip movement in the price, it becomes difficult to make profits out of the market. Therefore, it is perfect to trade when the volatility is at the average value.

The cost increases as the volatility decline, and they are inversely proportional to each other. In other words, highly volatile markets have the lowest costs. However, it is relatively risky to trade markets with higher volatility though the costs are low. Therefore, to maintain stability among the cost and volatility, traders may discover instances when the volatility is close to the average values or a little above it.

LEAVE A REPLY

Please enter your comment!
Please enter your name here