A major matched with a rarer name:wider spreads come with the game.
Currency pairs that include one major currency and one from a developing or smaller economy, such as USD/TRY or EUR/ZAR.
Exotic pairs typically have wider spreads and lower liquidity.
In plain words
An exotic pair combines a major currency, such as the US dollar or the euro, with the currency of a smaller or developing economy, such as the Turkish lira or the South African rand. Far less is traded in these pairs than in the major ones, so there are fewer buyers and sellers at any moment.
See it move
Exotic: the largest here
Why it matters
Thin trading shows up as wider spreads, larger jumps in price and, often, higher overnight financing charges. The cost of opening and closing a position can be many times that of a major pair.
Worked example
An example only. The figures are round and invented for the arithmetic: they are not market prices.
An invented major pair has a spread of 1 pip and an invented exotic pair a spread of 30 pips, taking a pip as worth 10 in each case for simplicity.
- 1Major pair1 × 10 = 10
- 2Exotic pair30 × 10 = 300
- 3300 ÷ 10 = 30 times the cost
The exotic pair has to move 30 pips in the trader’s favour before the position breaks even, against 1 pip for the major pair.
A common mistake
Large daily moves in an exotic pair can look like more opportunity. The thin trading that produces the moves also produces wider spreads and gaps, so cost and risk rise together.
Check yourself
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Educational information, not investment advice or a recommendation to trade.