What Are Exotics in Forex?

Q: 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.

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.

Forextraders' Broker of the Month

BlackBull Markets is a reliable and well-respected trading platform that provides its customers with high-quality access to a wide range of asset groups. The broker is headquartered in New Zealand which explains why it has flown under the radar for a few years but it is a great broker that is now building a global following. The BlackBull Markets site is intuitive and easy to use, making it an ideal choice for beginners.