Foreign currencies that are traded on the Forex market generally involve dealing with various currency pairs. Oftentimes, most Forex trading gurus and guides in Nigeria recommend beginner traders to focus on the popular pairs (otherwise known as majors), without emphasizing the other dozens of pairs at their disposal.
While trading on majors undoubtedly and generally has more potential for profits, for obvious reasons, trading uncommon pairs such as the minors can also bring in great profits with the right trading strategy. In fact, there are a number of currency pairs listed on the forex market that are much more volatile than most majors, and thus give you a plethora of price swing opportunities for greater profits.
In this article, we’ll explore the advantage of trading minor pairs in Nigeria. Before we go right into the benefits we stand to get with trading minors in Nigeria, let us take a look at what exactly Minors are.
What Exactly are the Minors?
The term minor currency pair or simply minor currency refers to those currency pairs that exclude the US dollars but still contain other widely traded currencies such as Euro, Yen, or British pound.
Examples of minor pairs include:
- EUR/GBP — Euro/British pound
- GBP/JPY — British pound/Japanese yen
- EUR/AUD — Euro/Australian dollar
- NZD/JPY — New Zealand dollar/Japanese yen
- CHF/JPY — Swiss franc/Japanese yen
- EUR/CHF — Euro/Swiss Franc
- GBP/CAD — British pound/Canadian dollar
Minor currency pairs obviously have a smaller share of the forex market in Nigeria compared to the generally acknowledged major currency pairs like EURUSD, USDJPY, GBPUSD, and USDCHF. As a result, this category of pair exhibits lower market liquidity and offers extensive/wider trading forex spreads than the majors.
Why You Should Trade the Minors
Oftentimes most traders in Nigeria prefer to only trade the major currency pairs. Only a few traders pay attention to the minor pairs and also put them on their watch list. Most educational contents found online and offline are mostly centered on the major Forex pairs. It is only natural for these traders to go with what they are exposed to, and know of. Well, here’s your chance to learn a bit about the advantages offered by minor currency pair trading.
- More Available Trading Instruments and Pairs
One of the obvious advantages of trading minor currency pairs is that it proves new market opportunities for traders in Nigeria. There are 8 major currencies (including the USD), and these are able to form a total of 27 currencies when crossed. Any trader who focuses just on major currency pairs will definitely miss out on any possible opportunity with the remaining 20 currencies. With trading the minors, you get to broaden your trading opportunities and this could translate to more income and profit if the right strategy is used.
- Longer-Lasting Trends
Minor currency pairs are characterized by high volatility and therefore provide more trading potential and opportunities for traders in Nigeria. This attribute makes for long-lasting trades which translate to high-quality trading opportunities. Even though they may not have high liquidity compared to major pairs, their wider spread still increases the probability of generating good profit. Ultimately, minor pairs offer high rewards in the medium to long term and may not be suitable for scalpers. So if you are able to spot one of these trends in the minor pairs and get in, it provides the potential for making some decent profits.
- More Price Movements
A lot of minor pairs have more price movements or swings than that of their major counterparts, and these are ideal conditions for a trader in Nigeria to base his or her trading strategy on. This is largely due to their high volatile nature: the more volatile a currency pair, the more its movements during trading sessions. These movements translate to more market trends, opening up more trading opportunities. This is in no way implying that these price movements and more market trends will guarantee successful trading outcomes. It is still going to require hard work and that you thoroughly monitor these pairs to spot good market trends to trade.
- Not Greatly Affected By Fundamental Factors
As stated earlier, minor pairs, unlike their major counterparts are not attached to the US Dollar. Bear in mind that the US is the most powerful and significant country in the world, and as such whatever happens in the world that greatly affects the United States will also affect any other paired currencies. This can be bad news for currency pairs attached to the US Dollars. Since minor pairs are not associated with the currency, they are protected to a large extent from the effects of these world events. This is an added advantage for minor currency traders in Nigeria, as they can trade comfortably without worrying about fundamental events.
A few tips on trading the minors:
· In order to increase your chances of success in trading minor pairs, I recommend that you begin by trading only a few currency pairs and stick to them. This allows you to easily manage trades and thus maximize your profits.
· Get as much information as possible on the selected currency pair and learn all you can about the pair. Find out the fundamental factors in depends, if any, and how to find your way around it
· The trading session of the selected currency pair should be clearly defined and your working time planned accordingly. Even though the Forex market is open for the whole day, it operates under three main sessions: United States session, London session and Tokyo session.
Bottom Line
I believe that by now you have a decent idea about how minor currency pairs work in Nigeria and how profitable they can be. This is not in any way to imply that minor currency pairs are better than major currency pairs. However, I believe a combination of both will bring more gains to the table. Ultimately, the more currency pairs you have, the more opportunities you trade, and in turn the greater the potential for profit.
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