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Trading The NZD/HKD Forex Exotic Currency Pair

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Introduction

NZD represents the official currency of New Zealand, while HKD is the official currency of Hong Kong. It is an exotic-cross currency pair where NZD is the base currency, and HKD the quote currency. The price of NZDHKD determines the value of HKD, which is equivalent to one NZD. In other words, this pair represents 1 NZD per X HKD. For example, if the pair is trading at 5.14452, we would need about 5.1 HKD to purchase one NZD.

NZD/HKD Specification

Spread

To get the Spread value, we just have to subtract the Bid price from the Ask price. The value of the spread is set by a broker. However, the amount in pips depends on the type of execution model used for executing the trades.

Spread on ECN: 31 pips | Spread on STP: 35 pips

Fees

Like other financial markets, Forex has some fees that a trader needs to pay while they take a trade. Note that the broker does not take any fee on STP accounts, but a few fees are charged on ECN model accounts.

Slippage

The slippage is a set of pips formed by the difference between the demanded price by the trader and the execution price by the broker. The main reason for the occurrence of slippage is market volatility or the broker’s execution speed.

Trading Range in NZD/HKD

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.

NZD/HKD Cost as a Percent of the Trading Range

The volatility values from the above table show how the cost varies with the change in volatility. The ratio between total cost and the volatility values reconverted into percentages to have a better outlook.

ECN Model Account 

Spread = 31 | Slippage = 5 | Trading fee = 8

Total cost = Spread + Slippage + Trading Fee

= 31 + 5 + 8

Total cost = 44

STP Model Account

Spread = 35 | Slippage = 1 | Trading fee = 0

Total cost = Spread + Slippage + Trading Fee

= 35 + 1 + 0 = 36

The Ideal way to trade the NZD/HKD

The NZDHKD is a pair with high liquidity. Therefore, trading this exotic currency pair seems to be feasible. We can see from the above table that the highest Percentage of values are barely above 100%. It means this currency pair is relatively less expensive to trade.

The most significant costs are in the hourly timeframe only, as the costs in 2H, 4H, and daily timeframes are also low. However, every trader should avoid the volatile market condition. Therefore, the best way to trade this pair is to look out for the possibilities to be on lower timeframes also while sticking to the average volatile level.

Also, traders can reduce the trading costs further by eliminating market orders and placing orders as ‘limit’ and ‘stop.’ In this case, slippage can completely be avoided. Please go through the below table to further understand this.

STP Model Account (Using Limit Orders)

Spread = 31 | Slippage = 0 | Trading fee = 0

Total cost = Spread + Slippage + Trading Fee

= 31 + 0 + 0 = 31 

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