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Chapter 22, Part II. Crosses – Continuation of Discussion... Page 4

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 22, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

    Aug 28, 2009
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    Pairs creating

    Pipruit: Sir, looks like some idea has appeared, but I’m not sure. Now I’m looking in may trading software and see such pairs as USD/DKK (Danish Krone) and USD/SGD (Singaporean Dollar), but do not see, for instance DKK/SGD. But I suspect that somehow I can create this position artifically, but I still can’t catch it.​

    Commander in Pips: Nice observation, son. You’re absolutely right; this is relatively simple task to do. A pair created in this way is called a “Synthetic Pair”. You have chosen quite an unusual pair…

    Pipruit: And what is wrong with it?​

    Commander in Pips: Well, nothing is wrong with it at all. I just want to say that when we do something, we have to know why we do this, right? So, creating synthetic pair is made for a particular property. For example, it could be applied if some specific cross pair does not show necessary trading volumes and liquidity. In that case some large bank or institutional investor could open so-called synthetic position. Let’s say that it wants to sell NZD/CHF pair, since some big corporate clients from New Zealand want to protect their money and invest them in Switzerland. So, this bank is glad to do this, but it shows tight liquidity and it can’t satisfy all the demanded volume from the clients. When speculation is not the target, then it could sell NZD/USD and sell USD/CHF. These are more liquid pairs and as result this bank will get what it wants – short on NZD/CHF.

    Pipruit: I see. Well, I do not have any purpose and was just watching my trading software when this idea has come, that’s all.​
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