News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.



Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events


Economic Calendar

Economic Calendar Events

Free Trading Guides
Please try again
More View more
Real Time News
  • *Reminder: Weekly Strategy Webinar tomorrow morning at 8:30am EST on DailyFX! A look at the levels heading into #FOMC -
  • Key levels in forex tend to draw attention to traders in the market. These are psychological prices which tie into the human psyche and way of thinking. Learn about psychological levels here:
  • Markets Week Ahead: Euro, Dollar, Gold, S&P 500, Earnings, Inflation Check out @RichDvorakFX's latest market recap and preview plus all the weekly forecasts from the @DailyFXTeam at the link below! Link to Analysis - $EURUSD $SPX #Trading
  • Looking for a new way to trade reversals? One of the most used reversal candle patterns is known as the Harami. Like most candlestick formation patterns, the Harami tells a story about sentiment in the market. Get better with trading reversals here:
  • The non-farm payroll (NFP) figure is a key economic indicator for the United States economy. It is also referred to as the monthly market mover. Find out why it has been given this nickname here:
  • Knowing how to accurately value a stock enables traders to identify and take advantage of opportunities in the stock market. Find out the difference between a stock's market and intrinsic value, and the importance of the two here:
  • US indices have a packed week ahead with earnings from the major technology names, US GDP data due and an FOMC rate decision. With so much on the docket the potential for volatility is heightened. Get your stock market forecast from @PeterHanksFX here:
  • GDP (Gross Domestic Product) economic data is deemed highly significant in the forex market. GDP figures are used as an indicator by fundamentalists to gauge the overall health and potential growth of a country. Learn use GDP data to your advantage here:
  • The Federal Reserve System (the Fed) was founded in 1913 by the United States Congress. The Fed’s actions and policies have a major impact on currency value, affecting many trades involving the US Dollar. Learn more about the Fed here:
  • The US Dollar Index traded higher last week, sustaining its broader uptrend. Conflicting technical signals urge caution, but the directional bias remains skewed to the upside. Get your weekly USD technical forecast from @FxWestwater here:
How To Trade A Synthetic Currency Pair

How To Trade A Synthetic Currency Pair

Walker England, Forex Trading Instructor

Talking Points

  • Based on liquidity, not all currencies are matched for trading
  • Two USD currency pairs can be linked to create a third synthetic pair
  • Be creative in your synthetics but always monitor spreads and interest

It is imperative that new traders in the Forex market become familiarized with currency pairs and The Majors. While this is always a good place to begin your learning, what happens when you want to trade a non USD currency cross? If you are looking to trade pairs such as the exotic EUR/MXN (Euro / Mexican Peso), the answer will be through the use of a synthetic currency pair.

To help, today we will review the basics of a Synthetic currency pair and how you can create your own inside of your trading platform.

Synthetic Currency Pairs

So what exactly is a synthetic currency pair? A synthetic currency pair is one that is not listed, or not carried by brokers and other liquidity providers. Normally these pairs are not carried due to thin trading activity as a result from limited economic activity and capital flows between the two respective economic regions. However, even though a currency pair isn’t listed doesn’t mean you can’t create your own! A synthetic currency pair is created when we use two alternative pairs to create a third unique currency pair!

Now let’s learn how to create a synthetic currency of our own.

Creating a Synthetic

Traders can create virtually any Synthetic currency through trading two separate USD positions. For example earlier in the article, we mentioned a trader may want to trade the EUR/MXN currency pair. While this pair is not actively quoted, it can be replicated by trading both the EUR/USD and USD/MXN currency pairs.

In this scenario, if a trader wants to BUY the EUR/MXN, the EUR/USD should be bought putting the trader Long Euros and Short US Dollars. Then the USD/MXN can also be bought, adding a Long US Dollar position and Short Peso position in the mix. Once this is done the Dollar positions effectively cancel each other, leaving the trader Long Euros and Short Pesos!

As seen in the image below, this process can be replicated to also create a synthetic Sell position on the EUR/MXN.

How To Trade A Synthetic Currency Pair

Costs of Trading Synthetics

As with any currency transaction there is a spread associated with creating a synthetic currency trade. Since you are opening two individual positions to create a third synthetic trade there will be a spread associated with each transaction. As well traders should consider the interest rate differential between the countries they are trading between. Since there are three countries involved in a synthetic currency transaction this should be monitored as it may negative or positively affect the trade’s profitability.

---Written by Walker England, Trading Instructor

Follow me on Twitter at @WEnglandFX.

To be added to Walker’s e-mail distribution list, CLICK HERE and enter in your email information.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.