{"id":9770,"date":"2022-10-13T04:47:34","date_gmt":"2022-10-13T04:47:34","guid":{"rendered":"https:\/\/mdr.foobrdigital.com\/?p=9770"},"modified":"2022-10-13T04:47:34","modified_gmt":"2022-10-13T04:47:34","slug":"how-to-trade-a-synthetic-currency-pair-and-why-you-probably-shouldnt","status":"publish","type":"post","link":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/2022\/10\/13\/how-to-trade-a-synthetic-currency-pair-and-why-you-probably-shouldnt\/","title":{"rendered":"How to Trade a Synthetic Currency Pair and Why You Probably Shouldn\u2019t"},"content":{"rendered":"\n<p>Sometimes institutional forex traders can\u2019t trade certain currency crosses because they trade in such large sizes that there isn\u2019t enough liquidity to execute their order.<\/p>\n\n\n\n<p>In order to execute their desired trade, they have to create a \u201c<strong>synthetic pair<\/strong>\u201c.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">How to Create a Synthetic Currency Pair<\/h2>\n\n\n\n<p>Let\u2019s say that an institutional\u00a0forex\u00a0trader wants to buy GBP\/JPY but can\u2019t because there isn\u2019t enough liquidity.<\/p>\n\n\n\n<p>To execute this trade, they would have to buy both GBP\/USD and USD\/JPY (earlier in this lesson, we learned that these pairs are called its&nbsp;<strong>legs<\/strong>).<\/p>\n\n\n\n<p>They are able to do this because there is plenty of liquidity in&nbsp;<strong>GBP\/USD<\/strong>&nbsp;and&nbsp;<strong>USD\/JPY<\/strong>&nbsp;which means they can make large orders.<\/p>\n\n\n\n<figure class=\"wp-block-image aligncenter\"><a href=\"https:\/\/bpcdn.co\/images\/2016\/05\/grade15-gbjpy-synthetic.png\"><img decoding=\"async\" src=\"https:\/\/bpcdn.co\/images\/2016\/05\/grade15-gbjpy-synthetic.png\" alt=\"Synthetic Currency Pair\" title=\"Synthetic Currency Pair\"\/><\/a><\/figure>\n\n\n\n<p>If you\u2019re a retail forex trader, and you wanted to pretend to trade like an institutional trader, then you could technically trade synthetic currency pairs as well.<\/p>\n\n\n\n<p>But it wouldn\u2019t be too smart.<\/p>\n\n\n\n<p>Ever since the great Al Gore \u201cinvented the internet,\u201d technology has improved to the point now that even weird currency crosses like&nbsp;<strong>GBP\/NZD<\/strong>&nbsp;or&nbsp;<strong>CHF\/JPY<\/strong>&nbsp;can now be traded on your forex broker\u2019s platform.<\/p>\n\n\n\n<p>Aside from having access to a larger \u201cmenu\u201d of currency pairs to trade, the spreads would be tighter on the crosses compared to the synthetic pair you\u2019d create.<\/p>\n\n\n\n<p>And let\u2019s not forgot about&nbsp;<strong>margin use!<\/strong><\/p>\n\n\n\n<p>Creating a synthetic\u00a0currency pair\u00a0requires you to open two separate positions and each position requires its own margin.<\/p>\n\n\n\n<p>This\u00a0<strong>locks up unnecessary capital<\/strong>\u00a0in your trading account when you can simply trade the cross-currency and save on\u00a0margin.<\/p>\n\n\n\n<p>So unless you\u2019re trading&nbsp;<strong>yards<\/strong>&nbsp;(forex slang term for one BILLION units), forget synthetic currency pairs and stick to currency crosses.<\/p>\n\n\n\n<p>You will be saving yourself some pips (thanks to a tighter spread) as well as freeing up your capital so you can take on more trades.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Sometimes institutional forex traders can\u2019t trade certain currency crosses because they trade in such large sizes that there isn\u2019t enough liquidity to execute their order. In order to execute their desired trade, they have to create a \u201csynthetic pair\u201c. How to Create a Synthetic Currency Pair Let\u2019s say that an institutional\u00a0forex\u00a0trader wants to buy GBP\/JPY [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[879],"tags":[],"_links":{"self":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/posts\/9770"}],"collection":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/comments?post=9770"}],"version-history":[{"count":0,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/posts\/9770\/revisions"}],"wp:attachment":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/media?parent=9770"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/categories?post=9770"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/tags?post=9770"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}