Exotic pairs: the spread you see is a polite suggestion

[Shadow Trader]

USDTRY, USDZAR, USDMXN and friends advertise spreads that look tempting next to EURUSD, until a trader notices how often the actual cost differs from the advertised figure.

Spreads on exotics move in steps rather than smoothly. They sit at one level, jump to another, and hold. During local market hours they can be reasonable. Outside them, particularly overnight in the home country, quotes can be several times wider, and a few brokers simply stop updating for stretches.

Swap is the other half of the story. High-interest currencies pay a lot to the right side and charge a lot to the wrong side. A scalp closed within minutes doesn't care, but a trade that drifts across rollover does.

Liquidity also vanishes around local events. Political headlines or central bank surprises in a country like Turkey can send a quote ten percent away in minutes, with gaps that make stops meaningless.

For anyone tempted by the big pip ranges, the real test is dividing the average move by the average spread. The ratio is often worse than on majors.

Which exotic has the most honest spread, and which one has been the least reliable?