Adding exotic currency pairs to a portfolio is a popular way to get exposed to a wider variety of assets.
These pairs, which include currencies from emerging markets or smaller economies, offer unique opportunities due to their volatility and potential for high returns.
For traders in regions like India and Southeast Asia, exotic pairs can serve as valuable tools for diversification, potentially increasing returns from trading. Octa Broker, a broker with globally recognised licences, explains the basics of exotic pairs and provides tips on how to navigate such a dynamic landscape, where understanding volatility and managing risk is paramount.
Key characteristics of exotic currency pairs
Exotic currency pairs differ from major and cross pairs in several ways, each presenting opportunities as well as challenges for traders.
Higher spreads and lower liquidity
Exotic pairs tend to have wider spreads due to lower trading volumes and reduced liquidity. For instance, the USD/ZAR pair…