What are Exotics?

Exotics Definition. “Exotics” is a foreign exchange term used to describe a currency that is thinly or not actively traded, as opposed to major currencies. Major currencies are the USD, EUR, GBP, AUD, JPY, CHF, CAD, and NZD. Currency pairs of these major currencies are often dubbed major or minor as another distinction. However, Exotics tend to be currencies of developing countries and are not easily traded in a standard brokerage account. The countries in this class typically have weak banking infrastructure, frequent devaluations, balance of payment deficits, unstable economies and political instability. Forex dealers generally do not make markets in these Exotics unless for currency speculation. Due to illiquidity, high risk, and lack of market depth, Bid/Ask spreads tend to be very large and therefore, very expensive even for a forex speculator.

Risk Statement: Trading Foreign Exchange on margin carries a high level of risk and may not be suitable for all investors. The possibility exists that you could lose more than your initial deposit. The high degree of leverage can work against you as well as for you.