You know how in every group there are cool kids and losers? Well, in forex trading the situation is not really that different.
That means that their liquidity in nowhere near the liquidity of the popular kids couples.
It is actually quite the same – there are popular currency couples like EUR/USD and USD/CAD and there are couples that are not really that popular like AUD/CHF, CAD/CHF and GDP/JPY. These are the couple which have gained the name of obscure crosses.
Obscure crosses. Sounds quite mysterious to me. But in reality they are quite the enemy of us – traders. Once again – these are the couple that are traded but not as much as the popular couples. That means that their liquidity in nowhere near the liquidity of the popular kids couples.
Lower liquidity level means that there is much more volatility in the performance of the couple. And the less popular it is, the more volatile it is.
Do you see the spikes of the price of this NZD/CHF chart? And there is only one way that we can save ourselves from the volatility like that. It is outing much wider stops while trading couples like that.
Those who want to trade obscure crosses are to pay the price for their wish by these wide spreads. You kamikazes are also to be prepared for some wild performance as well as rapid swings. But in the end if you play your cards right you can always go out of the ring with a big win on your hands!
Doesn’t that sound cool? Maybe the cool kids are going to let you sit at their table in the cafeteria tomorrow!?