USD/NOK TRADING TUTORIAL

The USDNOK is a forex pair representing the American dollar and the Norwegian krone. It is one of the commonly traded exotic pairs in the forex market. Scalpers and day-traders especially favor it because of its good liquidity ratio compared to other exotics. The NOK is allegedly the 14th most traded exotic currency in the financial market.

While some experienced traders enjoy speculating on exotic forex pairs, others avoid it as a risk management tactic in their trading. And indeed, the majority of people lose when they trade on non-major pairs.

It takes the right strategy and favorable market conditions to win in this trade. And in this article, we will explain different strategies traders have used to profit from trading this pair.

But before that, let us first understand the krone, the factors that determine its exchange rate, and the pros and cons of trading this pair.

History of USDNOK in the forex market

Norway adopted its current national currency, the krone, in 1875, after they joined the Scandinavian monetary union. The union comprised of Sweden and Finland. At this time, the krone was pegged to gold, and the exchange rate was kr2,490 per kilogram of gold.

Before the start of world war 1, the union disbanded. But Norway still held the gold reserves for these member countries, so the krone was used as the gold standard. Until 1931, when Germany occupied Norway. 

Between this period of 1931 to 1945, one krone was equal to 0.6 reichsmark, Germany’s national currency at the time.

After the war in 1945, it was taken off reichsmark and pegged to the British pound at 19.9 kroner to 1 pound.

And in 1939, it was pegged to the dollar and traded in the forex market at 4.40kroner to 1 dollar.

In the early 90s, the krone was a popular currency in the forex market. Speculators often traded the USDNOK pair but were always on a BUY position, that is, betting against it. As a result, the krone steadily grew weak against the dollar leading the Norwegian central bank to let go of the fixed exchange rate. In 1992, they adopted the floating exchange rate and have kept to it to this day.

Norway’s relies mainly on the exportation of petroleum and hydroelectric power. The country is, in fact, the largest exporter of these products in western Europe. Fishing and mining are also parts of its economy. 

Paired with the US dollar, the US being the world’s largest economy, makes it highly liquid. According to some experienced traders, this pair can pass 500 points per day and is actively traded during the European and American trading sessions.

Factors that determine the USDNOK exchange rate are

1. Price of oil in the global market

2. Federal reserves interest rates

3. Both countries GDP 

4. Inflation

5. The unemployment rates

6. The economies of both countries’ major trade partners.

Pros of trading USDNOK

1. Good liquidity rate compared to other exotic pairs.

2. Profit can be huge due to high volatility

Cons of trading USDNOK

1. High spreads

2. Massive volatility

The first step to trading usdnok is to choose a good broker. There are many of them, but some do not trade exotic pairs. Others do, but only specific ones.

First, you need to find out if the broker offers usdnok trading opportunities before signing up to trade.

Markets.com and Roboforex are well-known brokers that provide usdnok trading opportunities for their traders. There are others, but let’s briefly examine their offerings.

Markets.com 

Markets.com, a subsidiary of Playtech UK, was founded in 2008 in Cyprus and now has a presence across Europe, Asia, and Africa.

a brief review of the broker:

  • Customer rating

The broker earned 4-stars on Trustpilot, showing that most traders are satisfied with its service

  • Minimum deposit

The broker accepts a $100 initial deposit. Multiple options are available for this, including MasterCard and Visa.

  • Regulations

Trading with a licensed broker protects you from scams. You will also enjoy all the policies mandated by the regulatory bodies, such as insured funds (in case of bankruptcy), data protection, standard service. 

Markets.com is regulated by CySec with license no. 092/98, Fsca – registration no. 46860, and Asic with authorization no. 424008. 

So you will assuredly be trading with a safe broker.Trading platforms: its in-house platforms include Markets.com web, MarketsX, Marketsi. Traders can also trade on Mt5.

  • Leverage

Traders can enjoy leverage between 1.30 | 1.400

  • Assets

More than 2000 assets can be traded on its platform, including forex pairs, indices, CFDs, commodities, and more.

  • Spreads

Spreads on major pairs start from 0.2pips. But on usdnok, it can be up to 100pips or more, valued up to $1.

  • Fees

There are 0 withdrawal and deposit fees and 0 swap fees on forex. On other assets, overnight fees may be charged.

Pros of trading with markets.com

  • Regulation: Multiple regulations make it a safe and secure platform for trading. They also provide insurance for traders’ funds in case of insolvency.
  • Free demo accounts: The platform allows traders to test its trading environment with a free demo account. With this, you can see all its features before signing up to trade for real.
  • Easy and fast account opening: It takes a minute or 2 to register. After which, you will receive a verification link in your email to complete the process. 
  • Up to 62 forex pairs, including usdnok. Only a few brokers provide this many opportunities to traders.

Cons

  • No copy-trading: copy-trading is great for inexperienced traders or those who find it difficult to understand technical analysis. The trader only has to do what the copied-trader does while using this service. The copied trader is usually an experienced investor with excellent trading knowledge and a proven record. Most traders use copy-trading with exotic pairs because of the higher risks. But you won’t find the service on markets.com 
  • Support unavailable on weekends: Customer service is only available on weekdays, though round the clock. 

Roboforex

It was founded in 2009 and has its headquarters in Belize. It has since served traders across Europe and Asia, offering different selections of trading accounts.

Features of Roboforex broker

  • Regulations

The broker is licensed by Ifsc Belize, with registration no. Ifsc/60/271/ts/17, and CySec Cyprus, with license no. 191/13.

  • Leverage 

it offers between 1.30 | 1.1000.

  • Minimum deposit

With $10, you can start trading on its platform. Funding accounts is easy as the broker offers different through which you can make payment. Wire transfers and credit cards are popular channels of funding.

  • Spreads and fees

Spreads start from 1.4pips for major forex pairs. But expect a higher one for exotics like USDNOK. Overnight fees may accrue for a pro-cent account.

  • Trading platforms

With this broker, you can trade on mt4, mt5, cTrader, and RTrader.

  • Support

Customer service is available 24-5 via LiveChat, email, or phone.

Pros

  • Fast execution: traders can enjoy speed in the execution of their trades, thereby avoiding slippages.
  • 4 options-of -currency accounts: you can choose to open your trading account with Euro, Dollar, CNY, or gold.
  • Demo trial: A free demo account is offered for tests on the platform before signing up to trade.

Cons

  • Trading fees on stocks and CFDs are relatively high

The 2-brokers mentioned are among many that offer USDNOK forex pair. But before choosing a broker, ensure they are available and well-regulated in your region.

Once you’ve found a good broker, follow these steps to start trading the USDNOK pair

Step-1 Trade with the free demo

Create a demo account with your preferred broker. With this, you can test the company’s trading platform. You can try out its features without any risk. If you’re new to forex trading, it is an opportunity to familiarize yourself with the market environment before you go live.

Step-2 Register with the broker

Click on the sign-up button on your chosen broker’s website and fill out the registration. You should receive a link in your email within minutes. Click on it to verify the new account and complete the registration. You may be required to upload an ID and or proof of address for their KYC documentation. 

Step-3 Deposit funds in your new account 

Your broker should offer several easy funding methods. Most good brokers assign dedicated support representatives to customers to guide them through to the initial stage, up to the first trade. The rep will show you the easiest way to fund your account. 

Step-4 Trade the UsdNok for real

After funding, your balance can be seen on your dashboard account balance page. To begin trading, click on quotes and scroll to select UsdNok. 

Step-5 Choose a position 

There are 2-positions: the BUY and the SELL position. The BUY position means you believe the base currency, the USD in this case, will gain value, while the NOK will grow weak. The SELL position is the reverse. Prior research and analysis will help you determine the profitable position at the time of your trade. 

  1. When the trade matures, you then exit your position by clicking on close. 
  2. Strategies for trading usdnok

As I mentioned in the beginning, trading a forex pair like usdnok requires knowledge of technical analysis. A favorable market condition is will also make your trading more exciting because of the gains. 

This pair has a higher volatility than other major or minor pairs, so the trader has to find one or several effective strategies to trade it with. 

Below, we list some of these strategies that have worked for this pair.

  • Trend-sell

One common approach is the trend-sell trading approach.

As it is with all trading and investments, the essential thing before opening a position is to identify a buy or sell opportunity by looking at the trends.

In this case, most traders use the Fibonacci tools to identify correction points and then place a SELL trade.

For example, a trader may predict that the market is in a downtrend if there is a bearish pin-bar reversal for up to 6-days. 

What this means is the price stops its upward movement and begins retracement. 

Also, once the pin bar starts rejecting a former support level in the chart, this indicates a downtrend and is a suitable time for the trader to enter a SELL position. 

This approach is ONLY good in a bearish market condition when prices show a downward movement.

After opening the position, the trader should continue to monitor the trend as long as it stays open. Also, adjust your stop-loss constantly. 

The trend may last a few days. Once there is a bullish pin-bar reversal that indicates rejection of the previous resistance level, prepare to exit the trade.

  • Scalping strategy

As I mentioned, experienced traders love scalping the usdnok forex pair because of its high volatility. 

The approach also depends on technical analysis and involves leaving the trade positions open only for a few minutes. 

Here, the focus is to make small profits every few minutes, which quickly adds up to a considerable amount in the long run. Traders may open a position for 2-3mins, and after gaining between 10-20pips, they exit the trade. Then reopen again.

The approach is NOT suitable for a range-bound or sideways market condition.

An identified trend helps the trader ascertain the position to trade on scalping.

Because of the low payout, it is also crucial that you choose the broker with the lowest spread so that it does not eat into your meager profits. And always use your stop-loss.

There are different scalping strategies:

  • Moving average scalping

Moving average is the average closing price of the usdnok for a specific period, such as 10-days, 20-days, etc.

It shows you the past prices of the usdnok, and traders take this as a trend indicator. Although, the price may move in the opposite direction predicted. So most traders don’t fully rely on it for identifying trends.

Traders who use it often prefer the EMA(Exponential Moving Average)  because it reflects the current market trend better than the SMA(Simple Moving average).

A good way to go about it is to analyze a longer-term Moving average. Some traders often calculate up to a 100-days moving average. It takes time and effort but will produce a better result. 

Identify the direction of the moving average and place your trades in the same.

  • Support and resistance trading

This scalping method is equally good and not as complex. Some trading platforms often publish 3-support and resistance levels in their forex news, that’s S1 S2 S3, and R1 R2 R3. 

In this case, the S3 and R3 points will most likely be the strongest. So you can place a BUY trade near that support point or a SELL trade near the resistance level. 

This strategy is suitable for scalping because of the short timeframe. However, you need to be careful to exit the trade before the market breaks out.

  • Breakout trading

A breakout occurs when the price of the usdnok moves out of the support or resistance points. 

The major disadvantage of this trading approach is, breakouts can be false.

But identifying a genuine breakout is possible. It is often accompanied by a big candle that rises above the support or resistance levels. To trade on a breakout, first identify both of these points. Then look for a breakout above or below 10pips. 

Some traders also combine moving average and fundamental analysis to strengthen their predictions. After this, place your trade accordingly, ensuring your stop-loss orders are in place.

  • Swinging

This approach involves leaving your positions open for a few days or up to a week or 2. The goal is to make a big profit in fewer trades. 

For example, a trader makes 1000pips monthly from scalping or day-trading. With swing trading, they can make 300 or 400pips in a week, and it can quickly add up to surpass 1000.

The main disadvantage here is that the trader could incur huge losses if the trend suddenly changes. Ensuring all risk settings are in place, and monitoring your trade often can help prevent the loss.

To use this approach, you have to employ some fundamental analysis. Also, compute the moving averages for specific periods. Ideally, shorter periods of moving average will be better in this case. 

Do not use this strategy in a range-bound market or sideways market condition. 

  • Price action strategy

This strategy does not involve technical analysis. It entails looking at the price movement in your chart and identifying patterns. This pattern is supposed to indicate where the price will move next.

If the pattern shows that prices will rise, you pick a long trade. But if it shows that a price drop is the next move, then a short position will be profitable.

Experienced traders can easily identify a price action trigger’ by merely looking at the chart. And they profit from trading the usdnok with this strategy. 

There are different price action strategies.  They include:

  • Candle-stick strategy  

As the name implies, the pattern will appear as a candlestick with a long wick in the chart.

It indicates a reversal in a particular price movement that could be a rise or fall in the price depending on its position. 

For instance, a long tail below the candlestick shows that the price will rise soon. This is a suitable time to enter a long position.

  •  Inside bar strategy 

This pattern involves an inner bar and an outer one.

The inner, smaller bar is the inside bar, and the outer one is called the mother bar.

The inside bar usually forms after a strong price move and indicates a consolidation in the market. 

The best way to use this strategy is to place a buy-stop trade at the high of the mother bar, or a sell-stop at its low.

This way, your order gets filled once the price breaks out.

This approach is great in a trending market. All you need to do is trade in direction of the trend.

Conclusion

There is no one ultimate strategy with a hundred percent guarantee.  But these listed above can be effective in trading USDNOK. Remember to use your risk management tools, and it’s okay to stick with the strategy you’re most comfortable with.

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