Yen to Sterling – Trading Tips
Despite many types of currency pairs in trading, Yen and Sterling make a trendy cross pair. What is a cross pair exactly? It means it doesn’t include the US dollar when you are trying to estimate the exchange rate. Both Sterling and the Japanese Yen are considered top currencies in the world. One-fifth of the trading volume consists of Yen, and Sterling makes up for around 15 percent.
This article will explain a bit of everything to understand the background of the GBP/JPY cross pair and why investing in it can be very profitable if you know the fundamentals of cross pair trading in Forex. Fun fact: both GBP and JPY are considered to be the oldest currencies in the world that we are still using, even though the Japanese Yen came much later than Sterling. Energy pricing also significantly impacts JYP since Japan exports lots of natural gas and crude oil. Whenever something regarding global energy shifts, it will influence the GBP/JPY pair.
Day Trading and its benefits
Day trading is advised if you decided on the GBP/JPY pair since it offers many benefits. To name a few, there is:
The volatility is high and offers many chances to gain profit. In Forex, everything can change quickly, but high-rates brought benefit to this currency pair. During the financial crisis, there were only more opportunities for trading, and volatility got even higher. GBP/JPY is famous for its right spot, whatever is happening globally and influences the forex market. Being decentralized, Forex opened a new array of opportunities for trading in real-time.
What are the risks?
Despite its good position on the market, there are always some risks included, whichever currency you pick. Volatility can be a disadvantage sometimes, especially if you rush in as soon as a small sign of good opportunity occurs. That’s why this pair has a nickname, the “widowmaker.” Keep in mind that you have to obtain a certain amount of experience before you start cross trading. Since daily trends are high, you will need to set a wider stop-loss, causing losses.
Better informed than relying on promises
We always mention the importance of following what’s going on on the market and continuously learn. We said above, you’ll need experience in trading if you want to trade GBP/JPY, and it’s better to even try it out with a small amount than going big without any advice from experienced people. Another risk is the existence of automated software. It can predict better than you, so you’ll have to work harder to observe patterns and rely on your knowledge. Trusting your gut is also an essential factor, but it comes after you’ve established your position as an experienced and successful trader. It is a challenge, but that’s what takes you out of our comfort zone and challenges you to think differently and develop new trading strategies.
What else influences the GBP/JPY pair?
Banks play a huge role in how the economy affects the market, thus the currency value. There were many cuts in rate from the Bank of England, and the Bank of Japan has had very low-interest rates for a very long time, which influences the strength of JYP in contrast with GBP. If you are a trader, you should continuously pay attention to the CPI (Consumer Price Index) since it can be critical to JPY cross currency pairs.
Following this example, you can easily conclude that many “outside” factors decide how the currency will behave on the market. From political events to governments changing their policies, everything can be a determining factor in Forex. Stock market indexes should also be considered as something that can strengthen the currency or make it weaker. Global factors are never to be overseen in trading of this kind.
Positive and negative correlations
You should be familiar with these terms when you are trading currencies since, despite the general assumption, they move together since they are a pair. The tricky part is that they can move with each other but in the opposite direction as well. The positive correlation represents the pair reacting accordingly (when the US dollar acts as the counter currency). In contrast, negative correlation means they are moving in the opposite direction from each other (when the US dollar is the base currency).
What is essential for the day trading strategy?
Timing is essential when you are trading GBP/JPY and the best time frames are at 1:30, 2:00, 8:30, and 10:00 EST. Please pay attention to trading times and when they overlap, focusing primarily on the Asian European Overlap (it happens between midnight and 3:00 EST).
Scalping Strategy
This method is pretty exact, meaning you need to use the 5- minute time frame for tracking GBP/JPY signals. You are using twenty pips together with 24 EMAs on the indicator front. Here we have two terms: uptrend and downtrend. Uptrend means that the price went above 25 EMA, but when it gets below, then it’s considered a downtrend. Pay attention to the trend angle since a horizontal one can mean that the market is ranging. Don’t trend if the angle is flat, but consider trending when the angle is 30 degrees or more, which means a buy setup. When you are selling, choose a ten pip stop loss above the pin bar height. Still, be careful about it and talk to your broker if there is always something unclear.
One more thing to remember
The GBP/JPY cross pair can easily become bullish or bearish, so you have to set up small lot sizes if you want to be smart about your trading. Stop losses should be wide like we mentioned before, so you can go for higher targets while staying in the zone where you are minimizing the potential loss.
A strategy that works for one trader doesn’t mean it will work for you, so experiment with small amounts first, like when you were beginning to trade. That way, you can see patterns and create a strategy that will be something that compliments your trading personality. Stay informed, and don’t be afraid to ask!
