Factors to Consider When Trading Cross Currency Pairs
When trading cross currency pairs, there are a number of factors to consider in order to make informed trading decisions. Here are some of the key factors to consider:
- Market liquidity: Cross currency pairs may have lower trading volumes and liquidity than major currency pairs, which can impact pricing and increase the risk of slippage.
- Correlations: Cross currency pairs may be more closely correlated with other currency pairs or asset classes, which can impact trading strategies and risk management.
- Currency fundamentals: Consider the underlying economic fundamentals of the currencies involved in the cross pair, including interest rates, inflation, and geopolitical factors.
- Technical analysis: Use technical analysis tools to identify trends and patterns in cross currency pair pricing and make informed trading decisions.