NoaFX Tutorial

3.5 Pairs and Synthetic Pairs

Types of Currency Pairs

As mentioned in our previous topics, there are 2 common groups of Currency pairs;

Majors – All currency pairs that include the US Dollar, such as;

  • EUR/USD
  • GBP/USD
  • AUD/USD
  • USD/JPY etc.

Crosses – All currency pairs that do not include the US Dollar, such as;

  • EUR/JPY
  • GBP/JPY
  • AUD/CHF
  • EUR/GBP etc.

Often, at times, there could be a need to trade a specific currency pair that doesn't exist. For example, the currency pair GBP/CHF might not be readily available with most brokers. Given reasons to trade this pair, it will be an obvious disadvantage if we cannot trade this pair.

For these situations, we can create our own currency pairs, otherwise known as synthetic pairs.

Synthetic Currency Pairs

For a situational setup, if you may need a currency pair that is not offered by your broker, you may create your own synthetic pair.

This is done by buying or selling two or more currency pairs and forming a hedged position between the common currency and only risking your position to the pair that you would optimally trade.

For example, to trade the GBP/CHF

Likewise, to trade the AUD/JPY

Therefore, by understanding the concept of synthetic pairs, you can easily be able to create your own pairs and take best mileage of situations that the market presents.

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