Traders Tips
by Gerard on June 1, 2017

Why SEK is a great currency for day traders

There are about 5 major currencies in the world which most traders will pay attention to, but it’s also worth looking as other exotic currencies for opportunities. One such currency of interest is the Swedish krona (SEK). So, why should Forex traders look at the Swedish krona in their trades?

High liquidity

The most important aspect of a currency in Forex trading is its liquidity, which simply means the amount of volume in circulation. When there is a lot of a certain currency in circulation, it keeps the premiums low since there are plenty of buyers and sellers. This is why the US dollar is the most liquid currency in the world, since there is never a shortage of demand.

The Swedish krona is not far behind the US dollar, as the latest report by the Bank for International Statement (BIS) shows. As of April 2016, the SEK accounts for 2.2% of the daily turnover in the Forex market, placing it at number 9 which is behind the Chinese renminbi but ahead of the New Zealand dollar and even the Mexican peso. While there are many reasons for such a turnover, estimates at least 10% of the volume to be accounted for various activities related to online betting and gambling.

That alone is impressive, but more important is the rising popularity of the SEK. In 2013, the SEK was at 11th position behind the New Zealand dollar and Mexican peso, which shows increasing interest in the contrast, the euro is losing interest due to financial crises in the region. In 2010, the euro held a 39% market share which declined to 33% in 2013 and 31% in 2016. The SEK is gradually becoming a more significant currency in the .

With high liquidity comes narrower spreads and less slippage even in volatile market conditions, which is why liquidity is so important to Forex traders. A quick survey of Forex brokers’ spreads on SEK pairs like the USD/SEK and EUR/SEK shows that the spreads are getting narrower, hence even more liquidity.

Reasonable volatility

When looking at a chart of volatility index, currency pairs with the SEK have reasonable volatility which is neither too low or drastic. Annually, the volatility index shows the at 0.93%, which is about the same as the EUR/USD which stands at 0.81%.

Volatility is another factor Forex traders look for because it ensures there is enough movement in the currency’s value to provide profits. After all, you wouldn’t want a dormant currency that hardly move in a day, because then you would be holding a worthless investment. This is another reason why the SEK is such a great currency for day traders.

Sweden’s economic stability

The economy of Sweden has always remained stable through the implementation of effective measures, which is a good thing when investors are trying to predict movements in the currency’s value. Also despite being part of the EU, Sweden retained their own currency, which leaves the SEK largely unaffected by European politics. With such great control on both the economy and currency, the SEK is a reliable currency for traders.

By Gerard

Gerard contributes his 10 years of experience to the Forex Trading Bonus team by reviewing different brokers, outlining regulation, and reporting on the most important news in the industry. His brief stint in the Bank of England gives him the edge over many other writers to deeply analyze a policy change and come up with a distinct result that could come from it.

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