Trade Exotic Currency Pairs with Deriv
To start trading Exotic currency pairs on Deriv MT4, MT5 and Web Trader, you need to open an account first.
- Open an Account
Sign up for Deriv to open an account. It is free and may take only a minute to complete. - Practise
Open a demo account and start trading for free. Practise with an unlimited amount of virtual funds. - Trade
Open a real account, make a deposit, and start trading for real. Trade forex, indices, commodities, and more. - Withdraw
Get your funds quickly and easily. We support a variety of withdrawal options.
The available Exotic currency pairs on Deriv’s platforms are AUD/SGD, CHF/JPY, EUR/HKD, EUR/ILS, EUR/MXN, EUR/SGD, EUR/TRY, EUR/ZAR, GBP/SGD, GBP/TRY, HKD/JPY, NZD/CHF, NZD/SGD, 0SGD/JPY, USD/HKD, USD/ILS, USD/RUB, USD/SGD, USD/THB, and USD/TRY.
The foreign exchange market is the largest financial market in the world. 5 days a week, 24 hours a day, the average foreign exchange transaction volume of one day is 6.6 trillion US dollars. Deriv can trade more than 60 currency exchanges, and enjoy the fast mixing provided by the first-level liquidity.
What is Forex?
The foreign exchange market is a decentralized market, which means that they are not traded through centralized exchanges like stock or futures markets. These terms are often referred to as “FX”, “Foreign Exchange”, “Currency Market” or “Exchange Rate”, and market participants can use these terms interchangeably.
The difference between the foreign exchange market and other markets is that currencies are traded in pairs, so investors are actually trading two currencies at the same time. This is different from other instruments, such as stocks, indices, or commodities. Traders can speculate on the direction of the market.
Starting from the U.S. dollar, Deriv divides foreign exchange into several groups, explain some terms, and help you understand some terms that you will definitely encounter when trading.
U.S. dollar and main currencies
Since the U.S. dollar (USD) is the world’s reserve currency, most of the foreign exchange market revolves around the U.S. dollar. In 2019 alone, the strong U.S. dollar is estimated to account for 88% of all foreign exchange markets. This means that the US dollar, US economic data and Federal Reserve (Fed) activities are the focus of all foreign exchange traders.
Foreign exchange major currency exchange is the most liquid major currency trading against the US dollar. They include the Euro (EUR), British Pound (GBP), Japanese Yen (JPY), Swiss Franc (CHF), Canadian Dollar (CAD), Australian Dollar (AUD) and New Zealand Dollar (NZD).
Traders usually abbreviate these currency pairs:
- Euro/U.S. dollar (EUR/USD)
- Pound/U.S. dollar (GBP/USD)
- U.S. dollar/Japanese yen (USD/JPY)
Other special currencies
The transaction volume involved in other special currencies is very low compared to the above currencies. Specific examples include MYR (Malaysian Ringgit), IDR (Indonesian Rupiah) and LBP (Lebanese Pound). Few brokers will provide them because they are scarce in nature, and as a low-liquid market, transaction costs will be high, which makes them unsuitable for most traders.
However, Deriv provides more special currency exchanges that can be traded, such as:
- USD/MXN (Mexican Peso)
- USD/ZAR (South African currency)
- USD/TRY (Turkish Lira)
- USD/CNH (Offshore Renminbi)
- USD/SGD (Singapore Dollar)
Interest rate:
When we trade currency exchanges, foreign exchange traders will evaluate and sometimes try to predict the difference in interest rates (the difference between the interest rates of the two countries).
- Simply put, higher interest rates tend to attract money into a country and support it (demand). If the economy strengthens, the central bank usually raises interest rates.
- Lower interest rates tend to prevent the flow of money and weaken it. If the economy is expected to weaken, the central bank can lower interest rates.
Therefore, if investors identify an economy that is becoming stronger and an economy that is expected to become weaker, they can expect a more lasting trend.
Economic data:
An economic calendar is a core tool for many traders. It provides a K-line chart for the entire month, showing when we can expect fluctuations (or not necessarily). The central bank monitors these data points to determine the strength of the economy, thereby determining whether they will change interest rates and affect currency flows.
- Economic data is the key basis for financial models and central bank goals.
- News/day foreign exchange traders will trade around key economic data. They will look for data that exceeds or does not meet their goals; the larger the gap between the data and expectations, the more unstable we expect the reaction to price movements.
- Other traders can use the calendar as a reference instead of trading around potential volatility events.
- Not all data points are equally important. Some economic data are leading indicators and provide greater volatility, while other economic data are synchronized or lagging and are not worthy of attention.
How does foreign exchange work?
Since foreign exchange traders trade two markets at the same time, they always go long in one market and short the other. However, just like all Deriv’s CFD products, traders can freely trade all currencies, including long and short, to adapt to their direction deviations and strategies.
Once you have a basic understanding of spreads and trading principles, the process of conducting foreign exchange transactions is the same as that of other CFD products Deriv provides.
The easiest way to consider foreign exchange quotes is that it is the price ratio. If a trader opens a transaction and “buy” GBP/USD, they buy GBP and sell USD. However, if they “sell” GBP/USD, they are short GBP and long USD.
For example, AUD/USD is quoted at 0.6950
AUD/USD = Base currency/quotation currency
How much can 1 AUD exchange for US dollars?
1 Australian dollar can exchange for 0.6950 US dollars.
0.6950 / 1 = 0.6950
0.6950 U.S. dollars to 1.00 Australian dollars.
If the AUD/USD rises to 0.7500:
The Australian dollar rises relative to the US dollar, or the US dollar weakens relative to the Australian dollar
This means that people can use the Australian dollar to buy more US dollars than before
If the AUD/USD drops to 0.6500:
The Australian dollar weakens against the US dollar, or the US dollar strengthens against the Australian dollar
This means that people can buy less US dollars with Australian dollars than before.
In most cases, non-yen foreign exchange quotes will display four or five decimal places. However, the yen exchange rate should show at least two or three decimal places.
Concept of Point in Forex
When viewing foreign exchange quotes, you should notice that foreign exchange numbers are usually smaller than commodities or indices. Since currency quotes are much lower than other markets, traders usually speculate on the fluctuations in points, rather than prices or integers as seen in an index. For example, the trading price of the NASDAQ 100 CFD (NAS100) is approximately US$9,000, while the trading price of the EUR/US dollar is approximately 1.130000.
The word’pip’ is an acronym for “percentage in points”, which is equivalent to 0.1% of the quoted currency.
- This is an important number to understand, because you may use it to calculate transaction costs, transaction volume, entry and exit points.
- In most cases, the value of 10,000 points is equivalent to 1 currency unit.
- On the yen pair, the value of 100 points is equivalent to one currency unit.
- In most cases, the point is the fourth decimal place. In the center, the point is the second decimal place.0
The EUR/USD quote is 1.113 50.
Point is the fourth decimal place, in this example it is “5”. To calculate the number of points as a whole number, we multiply the non-yen traded currency pair by 10,000.
If the price is going to rise to 1.11 450 then we can say that the EUR/USD has risen by 10 points.
(1.11 450 – 1.11 350) x 10,000 = 10
If the price drops to 1.11 250 then we can say that the EUR/USD has fallen by 10 points.
(1.11 250 – 1.11 350) x 10,000 = -10
The USD/JPY quote is 107.5 20.
For the Japanese Yen currency pair,’pip’ is the second decimal place. To calculate the Japanese yen points, we multiply them by 100.
If USD/JPY rises to 107.920, we can say that the market has risen by 40 points.
(107. 920 – 107. 520) x 100 = 40
If the price drops to 107.220, we can say that the market has fallen by 30 points.
(107. 220 – 107. 520) x 100 = -30
A complete contract (also called a “hand”) is equivalent to 100,000 base currency units. If a “1” transaction is performed on MT4, it means that you have a lot (or contract) of 100,000 units of base currency.
Mini and micro lots can also be traded by choosing 0.1 of 10,000 or 0.01 of 1,000 units of base currency.
To trade 153,000 units of base currency, the trader will enter 1.53 contracts into the MT4 transaction.
Similar to collateral, margin is the amount required to deposit in a trading account to conduct a transaction, and is usually only a small part of the underlying market cost.
Long example: buying GBP/USD A trader buys 1 GBP/USD contract at 1.26500 USD (one contract is equal to 100,000 GBP)
1. If the GBP/USD rises to US$1.28000 (+150 points), the trader may end the transaction and make a profit of about US$1,5001).
(number of contracts x contract size) x (end price-purchase price)
2) . (1 x 100,000) x (1.28000 – 1.26500) = $1,500
2. If the price drops to 1.26000, the trader may end the transaction and lose about -500 USD
1). (number of contracts x contract size) x (end price-purchase price)
2). (1 x 100,000) x (1.26000) – 1.26500)
3. Under 400:1 leverage, only 0.25% of the margin ($ 316.25) is required to open the transaction
1). (number of contracts x contract size x price)/leverage
2). (1 x 100,000 x 1.26500) / 400
Example: Selling USD/JPY A trader sells 5 USD/JPY contracts at ¥107.25 (one contract is equal to 100,000 USD)
If USD/JPY drops to 106.50 yen (-75 points), the trader can Close the transaction and make a profit of USD 3,500.
(number of contracts x contract size) x (entry price-closing price)
(5 x 100,000) x (106.50 – 107.25) = ¥375k ($3,500)
If the price rises to ¥107.70, the trader may The transaction will end due to a loss of approximately – 2,100 USD
(number of contracts x contract size) x (entry price – end price)
(5 x 100,000) x (1.26000 – 1.26500) = -¥225k ($2,100)
400:1 leverage You can open a position with only 0.25% margin ($ 316.25)
(number of contracts x contract size x price)/leverage
(1 x 100,000 x 107.250) / 400 = ¥134.01k ($316.25)
Contest of Spread in Forex
Spread is the nominal transaction cost of entering the transaction, and is the difference between the buying price and the selling price. Spreads are variable and can be as low as 0 pips in professional accounts, or as low as 1 pips in standard accounts.
The amount of available liquidity determines the degree of volatility and tightness of spreads, so people usually expect the spreads to be smaller during active trading hours such as New York or London, and the spread of economic news is also very sensitive. If traders are waiting for the release of important data such as non-agricultural employment data or the Federal Reserve meeting, at this time, the reduction in liquidity or the expansion of interest spreads will affect the expansion of the spread, and the spread will not be restored until the liquidity returns to normal after the important data is released. The degree of normal quotation.
You can see the bid and ask prices in multiple locations in MT4, such as the “market watch” window and transaction orders.
Long (bullish) and Short (bearish) trades
Enter at the “ask price” (the price requested by the seller).
Exit at the “buy” price (for take profit or stop loss orders).
Go short at the “buy” price.
Exit at the “ask price” price (for take profit or stop loss orders).
Overnight interest:
Overnight interest is the cost of holding positions, calculated daily and derived from the relevant inter-bank price difference. Overnight interest can be positive (debit) or negative (credit) for the daily profit and loss of your transaction, depending on whether you are long or short and the interest rate of the currency pair.
You can check the overnight interest by selecting a currency in the “market quote” window of MT4, right-clicking and selecting “Specifications”.
Advantages of foreign exchange trading
- 24/5 trading
- Unlike the stock market, the foreign exchange market trades 24 hours a day, 5 days a week. This allows traders to adapt to their market according to their lifestyle, instead of trading in accordance with market time. For example, an Australian trader who works full-time during the day can choose to conduct intraday trading in the United Kingdom or the United States at night, or a European or American trader who works full-time during the day can choose to place an EOD order at night.
- The foreign exchange market is highly liquid
- Because foreign exchange traders have so much liquidity, it is easier to enter and exit the market at favorable prices and smaller spreads.
- The foreign exchange market is not prone to slippage
- Because the foreign exchange market is very liquid, it is not prone to large gaps. Of course, a series of bad economic data or geopolitical events may trigger currency gaps, but usually, due to the large amount of liquidity, they appear small and easier to manage; in addition, the foreign exchange market is closed on weekends, so weekly There may be gaps at the opening (that is, the stock market falls after earnings have not met expectations), but historically, their percentages are still much smaller.
- Reduce currency risk:
- In this case, we mean if you hold a CFD denominated in a currency other than the currency of the trading account, the currency exchange rate may have an impact on open trades. For example, if your account is in U.S. dollars, but you are trading FTSE 100 CFD (UK100), then you are actually trading British pounds from a U.S. dollar account. Therefore, whether it is good or bad, the fluctuation of GBP/USD may affect your actual profit and loss at the end of the transaction. So, one way to solve this problem is to hedge the position with GBP/USD.
Example of Forex trading
Long FTSE 100 using a US dollar trading account • Investors buy 1 FTSE 100 CFD (UK100) contract at a price of 6,150 pounds.
Their trading account is in US dollars.
This exposes them to the currency risk of GBP/USD.
Assuming that the FTSE 100 Index remains unchanged, if the value of GBP/USD falls, then technically, investors have already lost money when they close the FTSE transaction.
If the GBP/USD appreciates and the FTSE remains at the same level, the investor has actually made a profit with the support of the strong pound when he decides to close the transaction.
To help reduce this risk, investors can short 0.06 lots of GBP/USD (6,000 GBP). In this way, exchange rate fluctuations will not interfere with the profit and loss of FTSE trading.
Why investors choose Deriv?
- Leverage up to 500:1:
- Deriv provides high leverage levels up to 500:1 to keep margin requirements low.
- Lightening Quick Execution:
- Deriv is proud of the fast execution service. If you conduct day trading or use expert advisors, this is vital to the success of traders.
- Extremely competitive spreads:
- Use Deriv’s professional account to get the original spreads from the top liquidity providers, or get only 1 pips from the standard account.
- Primary liquidity provider:
- Without a primary liquidity provider, Deriv would not be able to provide such a small spread and fast execution.
- 60 foreign exchanges:
- Display all classic, professional and cross currency pairs and special currencies to achieve true global influence.
- EA:
- As the popularity of automated trading programs continues to rise, Deriv very much welcomes professional traders to Deriv to quickly execute transactions.
- No trading platform intervention:
- Deriv has been facilitating rather than hindering your transactions. Without the intervention of the trading platform, you will not see Deriv provides requotes.
Posted by FXBonus
Please check Deriv official website or contact the customer support with regard to the latest information and more accurate details.
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IronFX
Comment by Diletta
March 26, 2024
Awesome bonuses, good leverage. A few hiccups, but support rocks!