Forex Trading Exotic Currencies

Forex trading exotic currencies

Exotic Currency Pairs Are Valuable To All Traders


The exotic currency pairs are very valuable to forex traders, but most traders don't know why.

Exotic Currency Pairs Are Valuable To All Traders

In this article we will explain how it would be nearly impossible to trade the forex market without having the exotic pairs in your market analysis and trade entry system. Most forex traders trade one or two currency pairs. In this article we will discuss how to trade 7 major pairs and 21 exotic currency pairs with confidence.

If a trader uses the Forexearlywarning system, they will trade 28 currency pairs, 21 of which are exotic pairs. We will also learn how to use the exotic currency pairs to assist us with each and every trade entry as well as our overall market analysis.

 An exotic pair is a currency pair where the USD is not on the left or right side.

Forex trading exotic currencies

For example the EUR/JPY, AUD/CAD and the GBP/CHF are exotic pairs. Trading the exotics is incredibly rewarding, because generally speaking when the USD pairs are not moving the exotics start to move, which facilitates daily trading and higher pip potential across 28 pairs.

The 28 pairs we trade are various combinations of the 8 major currencies.



You can find trends and trades much more frequently if you look for trending pairs or entry points into trades on the major pairs, as well as the exotic currency pairs.

Exotic Currency Pairs Are Valuable To All Traders

Doing this will increase your potential by 300 to 400 % easily versus trading one or two pairs or just trading the USD pairs only. Traders will be completely convinced of this as you continue reading this article.

Trading The Exotic Currency Pairs Leads To More Pips


Any forex trader or educator who advises you to “only trade one pair” or “get to know one pair really well”, is giving bad advice.

Forex trading exotic currencies

 Advising someone to not trade the exotic pairs indicates clearly that this person does not understand a total market analysis approach, parallel and inverse analysis, or how to take advantage of movements of individual currencies. These educators and the traders who follow them are missing out on the opportunity the forex market is presenting to them. These traders will continue to force trades into the EUR/USD, or default to scalping.

Forex trading exotic currencies

Or else they will force trades into a small handful of major pairs, while ignoring the exotic currency pairs on days when they are moving very fast, missing all of the pips.

We feel very strongly that it is highly rewarding to trade the exotic currency pairs, with almost no added risk, except slightly higher spread. We have seen some online articles stating that traders should avoid the exotic pairs, we completely disagree. Trade all 21 exotic pairs alongside the 7 major pairs for extra profit, more complete analysis of the market, and better entry points.

The currency market is loaded with opportunities.

 Demo trading the exotic pairs will get you over any possible objections to trading them. The spreads on the exotics have been consistently dropping over the years due to the competition and increasing liquidity on the spot forex market.

Pros and Cons of Trading Forex Exotic Currency Pairs

If an exotic pair has a slightly higher spread, there is little difference between making 200 pips and 198 pips on a trade. At the end of the day if you are trading with the higher time frames, it does not matter that much.  Also, if you hang onto your trades with swing to position trading style, it doesn’t matter that much what pair you trade. 

Market Analysis Using Exotic Currency Pairs


The exotic currency pairs play a major role in analyzing the currency market, or when trying to develop a written trading plans for a specific pair.

Lets look at two examples.

EUR/USD analysis example: If you would like to prepare a trading plan for the EUR/USD, you would have to inspect 14 pairs, seven EUR pairs and seven USD pairs.

After inspecting these pairs you could determine if the EUR was strong or weak, and if the USD was strong or weak. This means that you would need to inspect six exotic EUR pairs to complete the EUR analysis, like the EUR/JPY, EUR/GBP, etc. Then you would have to analyze 7 USD pairs to analyze the USD portion of the pair.

 GBP/JPY analysis example: If you would like to prepare a trading plan for the GBP/JPY, you would have to inspect 14 pairs, seven GBP pairs and seven JPY pairs.

A Final Review of Forex Exotic Currency Pairs

After inspecting these pairs you could determine if the GBP was strong or weak, and if the JPY was strong or weak. Out of these 14 pairs, 12 of them would be exotic pairs.

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So in this case a trader would have to rely heavily on the exotic currency pairs to perform a proper analysis of the GBP/JPY pair.

 The EUR/USD is a major pair and the GBP/JPY is an exotic pair, but in both cases a large number of exotic pairs is needed to determine strength and direction, and to finish the trading plan. This is complete and total proof that the exotic currency pairs have high value when analyzing the forex market as a whole or any pair. There are other factors that you should build into preparing a forex trading plan for any currency pair and these additional factors like support and resistance, trend direction, time frame, etc.

are also important. Using parallel and inverse pairs in the same currency group to analyze a pair is the logic behind our trading system and the forex market.

Using Exotic Currency Pairs To Enter Trades


The exotic currency pairs also play a valuable role when entering forex trades.

When you use the Forexearlywarning trading system, you can prepare a list of rules for forex trade entries.

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This list of rules includes things like knowing when the scheduled economic news drivers are, the direction of the major trends and support and resistance levels. One more trade entry criteria is knowing if the pair you are about to buy or sell is supported by the rest of the market for trading direction.

Look at the example below.

This is a sell signal for the EUR/JPY using The Forex Heatmap®. This live forex trading indicator system is based on the 28 pairs we follow. At a glance and in under 30 seconds, you immediately can see that the EUR is weak and the JPY is strong.

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In order to confirm the sell you need to inspect 14 pairs, and only 2 pairs are major pairs, the other 12 pairs are exotic currency pairs.



This is strong and conclusive evidence that it is absolutely necessary to use the exotic currency pairs not only for market analysis, but for trade entries also. You must look at many pairs, including majors and exotics, to verify the sell entry.

The EUR/JPY is an an exotic pair with good movement and volatility. Most forex traders would never even consider trading the EUR/JPY and they are losing out on great opportunities daily. It is truly time for forex traders to change their mindset about trading the exotic pairs. Analyzing more pairs and checking The Forex Heatmap® at the point of entry gives you the extra information you need to excel and to move ahead of other forex traders, with increased pip production.

You can use the same technique for entering trades on the major pairs, or any one of the exotic currency pairs.

Some exotic currency pairs like the EUR/JPY have very low spreads and move extremely well, other exotic pairs like the AUD/CAD move slower.

Trading Exotic Currency Pairs

Pairs like the GBP/AUD move very fast, like a roller coaster, and some traders like the volatility and thrive on it. If the USD is in a strong trend up or down and the driving force in the market, traders should be able to tell using the market analysis techniques we provide.

In that situation traders should focus on the USD pairs. At other times, the exotic currency pairs are ruling the market and producing strong movement cycles, and traders should be nimble and move towards these pairs until they all start to consolidate and rest.

Swaps and Rollover Interest On The Exotic Currency Pairs


As of this writing the AUD and NZD have the highest interest rates of the 8 currencies we follow.

The CHF and the JPY have the lowest interest rates. This means that if you were to buy the AUD/CHF or the NZD/JPY, you would be paid some of the highest swaps and rollover interest available for these 28 pairs we follow. So once again the exotic currency pairs are more favorable for rollover interest than any of the major pairs.

What is exotic currency?

In a trending market on pairs like this you can go trade with the best trends and also hold onto the trades and get the best carry trade interest payments in your account. This is another advantage of trading the exotic currency pairs.

Conclusions about The Exotic Currency Pairs:

It should be very clear by now that it is not only advantageous to trade the exotic pairs alongside the major pairs, but it would be impossible to analyze or trade the forex market without daily inspection of the exotics.

Trade the exotic currency pairs along with the majors and make up to 3 to 4 times more pips and have many more trading opportunities than the EUR/USD scalpers traders or forex traders who only trade one or two major pairs.

After using the exotic pairs for assisting with your market analysis and trade entries, it will become clear that the exotics are critical to successful forex trading. Traders can tap all of the potential of the forex market with our tools, indicators and analysis techniques, applied to all 28 pairs. A deeper understanding of the currency markets will be the result.

If you incorporate the exotic pairs into your analysis and trade entry decisions you are operating with more information than other traders. Once you incorporate the exotic currency pairs into your analysis and trade entry decisions you will not go back to other trading systems.