What is the advantage of exotic currencies ?
- Very significant gains by taking advantage of the long-term trend of increasing exotic currencies
Example: In 2010 , the Brazilian real has appreciated 35 % against the USD . Thus, if January 1, 2010 a trader buys 10 000 BRL dollar at December 31, 2010, the amount originally invested now represents 13 5000 BRL, a gain of 3,500 BRL. A possible performance with the major pairs like EUR / USD.
What are the risks associated with exotic currencies ?
- The low liquidity can cause abrupt price movements making you lose everything
- The difficulty of finding an online broker offering a wide range of exotic currencies
- Well often prohibitive spreads that can reach 1500 pips on some pairs and some brokers
- The strong intervention of the monetary authorities who do not hesitate influence on prices by selling massive currency or even to impose taxes on speculative capital as in Brazil
- Political risk knowing that some of these countries have a real political instability
Recommendations :
To start on exotic currencies, the best advice is to practice long in demo mode and then understand how the pair on which you invest . This obviously involves finding economic indicators that have an impact on exotic currency selected . This information is usually not very accessible , but to speak the local language and know the information channels . Exotic currencies are more important than the major pairs like EUR / USD or GBP / USD potential gains but require a level of knowledge of Forex few individual investors have . Exotic currencies should be avoided if you do not fully know the Forex market . To help you choose your online operator , writing advise you to read our selection of the best brokers.
- Very significant gains by taking advantage of the long-term trend of increasing exotic currencies
Example: In 2010 , the Brazilian real has appreciated 35 % against the USD . Thus, if January 1, 2010 a trader buys 10 000 BRL dollar at December 31, 2010, the amount originally invested now represents 13 5000 BRL, a gain of 3,500 BRL. A possible performance with the major pairs like EUR / USD.
What are the risks associated with exotic currencies ?
- The low liquidity can cause abrupt price movements making you lose everything
- The difficulty of finding an online broker offering a wide range of exotic currencies
- Well often prohibitive spreads that can reach 1500 pips on some pairs and some brokers
- The strong intervention of the monetary authorities who do not hesitate influence on prices by selling massive currency or even to impose taxes on speculative capital as in Brazil
- Political risk knowing that some of these countries have a real political instability
Recommendations :
To start on exotic currencies, the best advice is to practice long in demo mode and then understand how the pair on which you invest . This obviously involves finding economic indicators that have an impact on exotic currency selected . This information is usually not very accessible , but to speak the local language and know the information channels . Exotic currencies are more important than the major pairs like EUR / USD or GBP / USD potential gains but require a level of knowledge of Forex few individual investors have . Exotic currencies should be avoided if you do not fully know the Forex market . To help you choose your online operator , writing advise you to read our selection of the best brokers.
