Why Trade in Exotic Currency Pairs?The first thing smart traders notice about exotics is how much in pips these wonderful currencies can move on any given trading day.Our charts show that the South African rand has an average daily range (ATR indicator) of 1,000 pips per DAY during an average trading year. Last year, during the credit crunch, the South African rand was moving more than 7,000 pips per day!The British pound varied from moving 150 pips a day to 550 pips a day at the height of the credit crunch.We have been able to see the real number of pips these currencies move per day is far more, in the exotic pairs, than in the majors ? even the volatile majors like the British pound.We believe the reason for so much volatility is that exotic currencies mostly have smaller trading volumes than the majors. As a result, news events have more influence and move fiat currency these exotic currencies, far more than the major currencies.While watching exotic currencies, you will notice that these currencies suffer more erratic behavior. That’s because traders in exotic currencies are usually in and out of trades faster. Forex traders want the better yields and pip movements that only exotic currencies can offer. When traders sense trouble, they act quickly to bailout of their positions.Exotics Present LESS Risk on a Pip-to-Pip Basis?Some currency traders are drawn to exotics because of that volatility, while others reject them for that very same reason. When it comes to exotics, the payout in dollars, in these currencies, varies noticeably from their pip value.As an example, when you trade into a major currency pair like the euro (EUR/USD) or British pound (GBP/USD), the usual risk is about a $1 each time your pair moves a single pip.
