What is NOT tradeable?

Randy BalcomBlog Post0 Comments

One of the many secrets of trading is to find a something that is liquid and matches your time frame and risk tolerance. There are Forex pairs that require huge accounts and guts of steel to trade the, becuase they are not liquid.

The easiest way to check on liquidity is the spread for Forex quotes. That is the current difference between what the market makers will let you buy or sell at any current price.

Here is an image of a current trading platform with the spread. You can see that something like the GBP/JPY is actively traded with a spread of 3.1 PIPS. Where the GBP/MXN or the NOK/JPY have higher spreads. The higher the spread, the more you pay to get into a position.

It is basically a function of how much money changes hands between these 2 countries. If the Bank of Mexico need to buy Pounds to offset a large factory order, it is less often and thus the higher spread.

Another tell tale are the wicks (or tails) on a candle stick chart. The larger the wick, the easier it is to get bounced out. Also, your stop has to be placed much further away in these pairs.

Below is an image of two candlesticks with no wicks and a large body:

Below is an image of two candlesticks with larger wicks.

 

 

 

 

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