Forex trading can give you above average returns. Major currencies like USD, GBP, EUR, JPY, CHF etc constitute the majority of the volume of currency trading. There are some pairs with one currency from the majors like above and the second currency in the pair is usually from developing countries from Asia, Africa, the Pacific and Middle East. These are called exotic currencies. Exotic pairs carry more risk than the majors. They have higher spread making the trade expensive. They trade in thin market. But that doesn't mean that you can't trade such currencies. Know your risks and you can get stellar profits from exotic pairs.
Exploit the High Volatility
If you are a trader, you can make the most of your fortune from the volatility. An average trader gets scared of volatility. But a seasoned trader knows it is in volatile markets he will make the killer money. Exotic currencies are very volatile. If you have a significant experience of trading the currencies, then exotic pairs will present you some opportunities which will give you a long runner. Usually volatile exotic pairs move very fast. They make bigger moves than the major currencies. If you are comfortable with such a big move, you can venture into this fancy part of currency world.
Trend Is Your Best Friend
It is a famous saying that for a trader trend is the best friend. If you can identify the trend early, home run trades can be found easily. Exotic currencies move fiercely when they are set in a trend. Compared to majors, these currencies make one sided move for a long time. Though they are risky, they reward you handsomely when they make one sided move with the trend. Spotting the trend comes to you when you have spent some time with the charts. So trading these pairs are definitely for the newbie.
Clear Charts to Analyze
Exotic currencies print the charts clearly. It is easier to analyze the charts of these pairs. There is not lot of consolidation as these pairs tend to move in a trend. Get your basics with the chart in place and you are good to go with these currencies.
Exposure to Commodities
Many of these pairs are correlated to commodities like gold and oil. The currencies of countries like Norway, Mexico, and Russia are strongly correlated with oil. South African Rand is closely tied with gold as it is one of the major producers of gold. You can get exposure to these commodities with the help of exotic pairs.
Diversify Your Investment
Apart from a short term perks; exotic pairs offer some other advantages. It gives your portfolio much diversification. If you have invested heavily in the developed countries, investing exotic pairs will spread the risk of your portfolio.
Trading exotic currency pairs requires good spread and fast execution. See where you can get this at HotForex review. No trader can win with continuous requotes. Check out a non-requote broker with good selection of exotic pairs on Trading Point review.
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