Introduction
GBP
Pound sterling, also know as the pound, is the official currency of the United Kingdom and many others. The Pound sterling is the oldest currency and even the fourth most-traded currency in the foreign exchange market, after the United States dollar, the euro, and the Japanese yen.
THB
Thai Bhat is the official currency of Thailand. It’s divided into 100 satangs, According to Bloomberg, the Thai baht was the world’s best-performing currency in 2018, and since then, Thai baht is the 10th most frequently used world payment currency.
GBPTHB is the abbreviation for the Pound sterling against the Thai baht. Here, the GBP is the base currency, and the THB is the quote currency. It is classified as an exotic-cross currency pair.
Understanding GBP/THB
In Forex, to find the relative value of one currency, we need another money to compare. The market value of GBPTHB determines the cost of THB that is required to buy one GBP. It can simply be understood as 1GBP is equal to how much THB, so if the exchange rate for the pair GBPTHB is 1.6894. It means that we need 38.92 THB to buy 1 GBP.
Spread
Forex brokers have two different prices for currency pairs: the bid and ask price. Here the “bid” price at which you can SELL the base currency, and The “ask” price is at which you can BUY the base currency. Hence, the difference between the ask and the bid price is called the spread. The spread is how brokers make their money. Some broker Instead of charging a separate fee for trading, they already have the fees inbuilt in the spread.
ECN: 28 pips | STP: 31 pips
Fees
A Fee is simply the commission you pay to the broker on each position you open. There is no fee on STP account models, but a few pips on ECN accounts.
Slippage
slippage refers to the difference between the trader’s expected price and the actual price at which the trade is executed. It occurs when market orders are placed during high fast-moving, highly volatile as well as when large orders are placed at a time.
Trading Range in GBP/THB
The amount of money you 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
- 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.
GBP/THB 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 next sections.
ECN Model Account
Spread = 28 | Slippage = 3 |Trading fee = 5
Total cost = Slippage + Spread + Trading Fee = 3 + 28 + 5 = 36
STP Model Account
Spread = 31 | Slippage = 3 | Trading fee = 0
Total cost = Slippage + Spread + Trading Fee = 3 + 31 + 0 = 34
Trading the GBP/THB
The GBPTHB is an exotic-cross currency pair and is a normal ranging market. For instance, the average pip movement on the 1H timeframe is only 82 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 prices are higher for low volatile markets and high for highly volatile markets.
To reduce your 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.
