Instruments and markets
Exotic pairs
Pairs matching a major currency with a smaller or emerging-market one - USD/TRY, USD/ZAR, USD/MXN and similar. Spreads are wide, moves are large, swap charges are heavy and liquidity can disappear with very little warning.
GFN’s figure
On a GFN account, a wide exotic spread is deducted from the same equity the daily loss limit is measured against - $3,000 on a $100,000 Instant account, $5,000 on the 1 Step and 2 Step.
In detail
Exotic pairs,explained
Exotics carry two costs a major does not: a much wider spread, and a swap charge that can be substantial in either direction because of the interest rate gap.
They are also the pairs most prone to gapping, which makes them a poor fit for an account with a hard drawdown floor and no appetite for an unexpected weekend move.
Related
Terms thatcome with it
Most rules only make sense next to the ones they interact with. These are the entries this one depends on.
Major pairs
The most traded currency pairs, all quoted against the US dollar: EUR/USD, USD/JPY, GBP/USD, USD/CHF, USD/CAD and AUD/USD. They carry the tightest spreads and the deepest liquidity, which makes them the cheapest pairs to trade frequently.
Minor pairs
Pairs between major currencies that do not include the US dollar - EUR/GBP, GBP/JPY, EUR/AUD and similar. Spreads are wider than on the majors and daily ranges are often larger, so the same strategy costs more to run.
Spread
The gap between the bid and the ask price. It is the cost paid on entry: a position opens slightly underwater by the width of the spread before the market has moved at all.
Swap
The financing charge or credit applied to a position held past the daily rollover. It reflects the interest rate difference between the two sides of the pair and can be positive or negative.
Liquidity
How much can be traded at a given price without moving it. Deep liquidity produces tight spreads and reliable fills; thin liquidity produces wide spreads, slippage and gaps.
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