Forex Dictionary Terms

Synthetic Cross Currency Pair

Posted on

Definition – What does Synthetic Cross Currency Pair mean?

A synthetic cross currency pair is an artificial currency pair that is created by taking offsetting position in an intermediary currency that trades with the target currencies. A synthetic cross currency pair is usually created using the U.S. dollar as the intermediary. Synthetic cross currency pairs have become less common because the most sought after cross currency pairs are now widely available.

ForexTerms explains Synthetic Cross Currency Pair

Synthetic cross currency pairs are still used to trade exotic currencies against each other. For a typical trader, however, synthetic cross currency pairs have several disadvantages. Mainly, they tie up more capital because two trades of equal size must be placed and the job of monitoring the trade is similarly doubled. For most traders, the eight most commonly traded currency pairs are enough, but advanced traders can turn to synthetic cross currency pairs when they run out of regular ones.

Other Terms

Random Articles