An exotic pair of what?
You can’t just trade whatever currency pair you want. Well, technically, you could, but you could be exposed to added costs if you did.
There are three groups of currency pairs that are traded.
The majors are pairs with:
- US Dollar
- European Union Euro
- Japanese Yen
- Great Britain Pound Sterling
- Swiss Franc
The majors have high liquidity and low spreads. You want to stick with these, especially if you are trading short-term.
The minors are pairs with:
- Australian Dollar
- Canadian Dollar
- New Zealand Dollar
- and also: Danish and Norwegian Krone, Swedish Krona
The minors have medium liquidity and medium spread. Trade them longer term or only during the high volume hours of the day. This is to minimize the spread.
The exotics are pairs with:
- everything else
The exotics sound, well, exotic. Trade them only for very long term trades as the spreads will be significant. Then again, don’t hold on to a bad trade just because the spread is too much. In fact, just don’t trade them at all–there are plenty of pairs that are not exotic.
See the infographic from Infographical Forex below: