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Trading The GBP/SGD Exotic Currency Pair

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Introduction To GBP & SGD Pairs

GBP

Great Britain Pound is also known in some contexts as the pound or sterling. It is the official currency of the United Kingdom and many British overseas territories. It is subdivided into 100 pence. The Pound Sterling is the oldest currency in continuous use, and also the fourth most-traded currency in the Forex market, after the United States dollar, the euro, and the Japanese yen.

SGD

The Singapore dollar is Singapore’s official currency, and it is divided into 100 cents. This currency is the thirteenth most traded currency in the world by value.

GBPSGD is the abbreviation for the Pound sterling against the Singapore Dollar. It is classified as an exotic-cross currency pair. In this currency pair, the GBP is the base currency, and the SGD is the quote currency.

Understanding GBP/SGD

In Forex, in order to find out the relative value of one currency, we need another currency to compare. It shows how much the GBP (the base currency) is worth as measured against the SGD (quote currency). It can simply be understood as 1GBP is equal to how much SGD. So if the exchange rate for the pair GBPSGD is 1.6894. It means that one GBP costs 1.6894 SGD.

Spread

The spread is the difference between the Bid (Sell) price and the Ask (Buy) price of an asset. The spread is how brokers make their money. Some broker Instead of charging a fee for performing a trade, the cost is built as a difference between the buy and sell prices of the currency pair.

ECN: 15 pips | STP: 19 pips

Fees

A Fee is simply the commission we pay to the broker on each position we open. There is no fee on STP account models, but a few pips on ECN accounts.

Slippage

Slippage is the difference between the price at which the trader wants to execute the trade and the price at which the trade is effectively executed. Slippage can occur at any time but is mostly happens when the market is very Volatile.

Trading Range in GBP/SGD

The amount of money we will win or lose in a given amount of time can be assessed using the trading range table. This is a representation of the minimum, average, and maximum pip movement in a currency pair.

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.

GBP/SGD Cost as a Percent of the Trading Range

The cost of trade varies based on the volatility of the market. This is because the total cost involves slippage and spreads apart from the trading fee. Below is the representation of the cost variation in terms of percentages. The comprehension of it is discussed in the coming sections.

ECN Model Account

Spread = 15 | Slippage = 3 | Trading fee = 5

Total cost = Slippage + Spread + Trading Fee = 3 + 15 + 5 = 23

STP Model Account

Spread = 19 | Slippage = 3 | Trading fee = 0

Total cost = Slippage + Spread + Trading Fee = 3 + 19 + 0 = 22

Trading the GBP/SGD currency pair

The GBPSGD is an exotic-cross currency pair and is a normal ranging market. For instance, the average pip movement on the 1H timeframe is only 62 pips. Note that the higher the volatility, the lower is the cost of the trade. However, this is not an advantage as it is risky to trade highly volatile markets.

Also, the larger/smaller the percentages, the higher/lower are the costs on the trade. So, we can infer that the costs are higher for low volatile markets and high for highly volatile markets.

To reduce the risk, it is recommended to trade when the volatility is around the minimum values. The volatility here is low, and the costs are a little high compared to the average and the maximum values. But, if you’re priority is towards reducing costs, you may trade when the volatility of the market is around the maximum values.

Also, we can take advantage of the Limit orders to reduce costs. When orders are executed as market orders, the risk of slippage always persists. But, with the help of limit orders, we can completely avoid slippage, thereby reducing the overall trading cost. When slippage is Zero, only trading fees and the spread will be taken into consideration to calculate the total costs. Hence, it brings down the cost significantly.

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