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# What Should You Know Before Trading The NZD/CAD Currency Pair

#### Introduction

NZDCAD is the abbreviation for the currency pair New Zealand dollar against the Canadian dollar. It is referred to as a cross-currency pair. Here, NZD is the base currency, and CAD is the quote currency. In this article, we shall be going over everything you need to know about this currency. Firstly, let’s get started by understanding what the value of NZDCAD depicts.

#### Understanding NZD/CAD

Comprehending the value of a currency pair is simple. The value of NZDCAD determines the Canadian dollars that must be paid to buy one New Zealand dollar. It quoted as 1 NZD per X CAD. For example, if the current value of NZDCAD is 0.86595, then 0.86595 CAD is required to purchase one NZD.

#### Spread

Spread is the primary way through which brokers make revenue. They have a different price for buying and selling. The difference between these prices is called the spread. It varies from broker to broker and their execution type.

ECN: 1 | STP: 1.8

#### Fees

For every execution, there is a fee levied by the broker. This fee is also referred to as the commission on a trade. It is nil on STP accounts. And on ECN accounts, it is usually within 6 to 10 pips.

#### Slippage

Slippage is the variation in the price executed by you and the price you actually received. It happens on market orders. Slippage depends on two factors:

• The volatility of the market
• Broker’s execution speed

#### Trading Range in NZD/CAD

The trading range is a tabular representation of the pip movement in a currency pair in various timeframes. These values help in assessing the risk-on trade as it determines the minimum, average, and maximum profit that can be made on a trade.

#### 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/CAD Cost as a Percent of the Trading Range

Cost a percentage of the trading range is an excellent application of the above table. By manipulating the values with the total cost, the variations in costs in different at different volatilities and timeframes can be calculated. For this, the ratio between the total cost and pip movement is found out and represented in percentage.

#### ECN Model Account

Spread = 1 | Slippage = 2 |Trading fee = 1

Total cost = Slippage + Spread + Trading Fee = 2 + 1 + 1 = 4

#### STP Model Account

Spread = 1.8 | Slippage = 2 | Trading fee = 0

Total cost = Slippage + Spread + Trading Fee = 2 + 1.8 + 0 = 3.8

#### Comprehending the above tables

There are two variables here, namely, timeframe and volatility. By varying these two, the variation in the total cost is examined. Note that the higher the percentage, the higher is the cost on a trade and vice versa. From this, we can make out that the prices are high when the volatility is low. And prices are low when volatility is high. Also, as the timeframe widens, the cost decreases.

#### The Ideal way to trade the NZD/CAD

It is not ideal to trade when the volatility is high, as it is risky. It is also not the best choice to trade when the volatility is low, as the costs are high. So, to keep a balance between both volatility and cost, it is ideal to trade when the pip movement of the pair is around the average values.

Talking about timeframes, trading the 4H or the Daily would be great, as the cost is bearable, and the trade wouldn’t take too long to perform as well.

Another simple hack to reduce cost is by trading using limit/pending orders instead of market orders. This will significantly reduce costs on a trade because the slippage on the trade becomes 0. It is observed that the cost reduces by about 50% of the original value. Below is a table representing the cost percentage when the slippage is made zero.

## By Reddy Shyam Shankar

I am a professional Price Action retail trader and Speculator with expertise in Risk Management, Trade Management, and Hedging.