USD/JPY - characteristics and features of the currency pair US Dollar Japanese Yen – trading in India

The currency pair USD/JPY has a good popularity among many traded currency pairs in the world. USD stands for U.S. dollar, and JPY - Japanese yen. These two currency pairs are considered major. There are several important characteristics that a good trader should have in USD/JPY.

These include low volatility and high liquidity. These are two important features of a good USD/JPY major pair. Low volatility means that there are fewer opportunities for price changes. Also, higher liquidity means that both sides have more bargaining power. When currency prices are very volatile, traders often fear that an unfavorable quote from the central bank is about to happen. However, when two currencies reach the same level, it causes the price to drop significantly.

Currency pair information
Currency pair information

A stable economy is also one of the essential attributes of the USD/JPY currency pair. Currently, many countries around the world are going through a period of economic stagnation. Some of them have experienced a recession and some have collapsed. On the other hand, a country like the U.S. is experiencing mild economic growth and most economic indicators are positive. So you can buy USD/JPY when its value is low and sell USD when it rises.

These are the most important character traits of the USD/JPY currency pair. You need to evaluate which of these traits are important to you. It is important to remember that these character traits have their own importance depending on the situation. In addition, they also have their own price. When trading, you need to weigh your character traits carefully to have a better chance of success.

What are currency pairs?

A currency pair is a ratio of two world currencies, which determine the exchange rate and are the objects of trade on the foreign exchange market. The name of a currency pair must contain the following currency names: the base currency is always indicated first, followed by the quoted currency.

Economic events
Economic events

All currencies of the world are named with a conventional abbreviation consisting of three symbols that designate the name of the state and currency unit: USA - USD, Japan - JPY. Currency pairs are indicated either as merged abbreviations or with a slash.

The bottom line is that in the currency pair USD/JPY, you buy the U.S. dollar for the Japanese yen.

The quoted currency pair USD/JPY is considered the base or benchmark for the exchange rate between the two currencies. In the past, it was the only real base currency pair. However, now the situation has changed considerably with regard to this base or benchmark. There are now many more.

Currency prices 

Currency price is the price (quotation) of a monetary unit of one country expressed in the monetary unit of another country, precious metals, securities.

The exchange rate shows what the ratio of one country's currency to another country's currency is. In other words, the exchange rate, in simple words, is the number of units of one currency which you have to pay to get a unit of another currency.

The most equitable and profitable exchange rate is the one formed in conditions of free trade in currency on exchanges. The price in this case is determined by the market and no one's profit is included. That is why it is most profitable to buy currency on the exchange, if there is such an opportunity.

Most traders know where currency quotations come from - it is trading at the exchange, which forms the basis for all other rates. However, there are exceptions. In order to find out, in which case the rate of a certain currency is formed without taking into account the influence of this currency trading on the exchange, as well as how the exchange rate is determined in this situation, it is necessary to study the main types of official currency rates.

News about the USD/JPY currency pair
News about the USD/JPY currency pair

When carrying out transactions in currency, agents (e.g., banks) set two prices:

  • The seller's price (the ask, at which the bank sells the currency);
  • The buyer's price (bid, at which the bank buys the currency).

The difference between these rates forms the spread. The value of spread determines the profitability of currency operations and also describes the degree of uncertainty in the currency market about the future rate. The greater the uncertainty, the greater will be the spread. If the bid and ask prices differ, the cross rate depends on how one currency is converted to another.

There are also forms of currency rates, let us briefly review each of them: 

  • Fluctuating - changing freely under the influence of supply and demand and is based on the application of the market mechanism.
  • Floating exchange rate is a type of exchange rate which fluctuates, which is caused by the use of the exchange regulation mechanism. For instance, to limit large fluctuations in the exchange rate of national currencies which can cause unpleasant consequences of economic and monetary relations, the countries that joined the European monetary system introduced the practice of coordinating mutual relative fluctuations of the exchange rate.
  • Fixed - the officially established relation between national currencies, which is based on the currency parity, defined in law. It allows fixing the content of monetary national units directly in U.S. dollars or gold with a strict limitation in the specified limits (about one percent) of fluctuations in market exchange rates.

Trading sessions 

A trading session is a period of time during which currency transactions are executed by market participants at trading venues located in one geographic area. There are four main sessions: European, Asian, Pacific and American.

Forex trading sessions are differentiated by currency pairs and trading patterns. Each session can also be characterized by minimal price fluctuations, the highest level of volatility and the lowest level of influence of fundamental economic factors. The most active Forex trading begins with the opening of the European trading session, followed by the quietest. This is followed by the opening of the Asia-Pacific trading session and the most active trading hours in the United States. These trading hours vary greatly from country to country.

USD/JPY trading conditions
USD/JPY trading conditions

In the U.S., trading sessions tend to be longer and have more trading hours. For example, most weekends and holidays bring the highest daily trading volume. In Europe, trading sessions tend to be shorter. This is due to the fact that most European countries do not trade throughout the week. Consequently, most trading sessions in Europe last only two days.

Different countries also have different trading hours. For example, in the United States, there are four main trading hours. As a rule, these trading hours depend on the time zones of the country. In Europe, there are six time zones. Consequently, worldwide trading is open in all time zones except the one closest to local time.

Trading sessions may be separated by an hour or two, depending on their duration. Trading sessions that last one hour or less are known as major currency pairs. On the other hand, trading sessions lasting more than an hour are classified as secondary currency pairs. Major and minor currency pairs have different profit and loss margins. There are cases where traders trade without the money spread or leverage.

There are five major currency pairs in most Forex markets. These are US dollar/euro (USD/EUR), US dollar/Japanese yen (USD/JPY), US dollar/British pound sterling (GBP/USD) and US dollar/Swiss franc (CHF/SCHF). However, the list of currency pairs is not complete. In addition, trading sessions often include some other currencies such as the Australian dollar, Canadian dollar, Chinese yuan, Brazilian real Singaporean dollar, Turkish pound and New Zealand dollar.

USD/JPY currency pair chart
USD/JPY currency pair chart

There are a few general points about when it is best for an investor to buy and sell forex currency during trading sessions. Generally, investors tend to buy currency during these times, especially when pairs have low liquidity. The liquidity of a currency pair being traded is called the absence of "waste". This liquidity allows traders to maximize their profits even if they hold a position overnight.

The time period in which European markets are traded can be determined in several different ways. Typically, the time period is calculated according to the average daily trading volume during the trading session. This calculation is usually made after all opening and closing trades are included in the data set for a particular currency pair. The data can also be chosen to represent the time period based on the duration of the last currency news report.

Forex pairs listeng
Forex pairs listeng

There are many reasons why traders participate in four trading sessions per week. Most participants in trading activities are retail traders who trade on their personal computers. Some traders are large financial institutions, such as hedge funds, which use the forex options market as part of their diversified portfolios. Large retail traders typically use a Forex trading platform and trade one currency pair per session. Many retail traders use automated trading software, which they can program into their own strategies. Most European institutional traders are also familiar with the four trading sessions, which provide them with a ready source of trading information to help them make more informed decisions about their currency trading activities.

Trading timeframes 

A timeframe is a time interval of quotes on a chart of a financial instrument. That is, the time that includes one candle.

As a rule, timeframes have their own designations and without understanding them, the trader can get confused and make a mistake, which will lead to the loss of finances, which will not please neither the trader nor his broker. 

So, now we are going to make it clear. The time frame is denoted by the number and the Latin letter. The letter indicates the period of timeframe (minute, day, month, week or year), while the number - the number of such periods in the displayed element of the chart:

  • M1 - 1 minute;
  • M5 - 5 minutes;
  • М15 - 15 minutes;
  • М30 - 30 minutes;
  • H1 - 1 hour;
  • H4 - 4 hours;
  • D1 - 1 day;
  • W1 - 1 week;
  • MN - 1 month.

By changing the timeframe, you can see the price fluctuations in different timeframes, which will help you in technical analysis.

Trading Strategy

In finance, a trading strategy in the form of a working model is a pre-designed plan that is designed to achieve a specific profitable result by taking short or long positions in various markets. The reasons why such a trading plan helps are its reliability, comparability, consistency and soundness. You must be sure that it fits your trading style as well as fits your personality.

There are two types of trading strategies - technical analysis and fundamental analysis. Technical analysis consists of analyzing price movements over a time frame, considered as market patterns. Fundamental analysis, on the other hand, consists of using economic factors to determine the direction of market prices. Both approaches are very important when it comes to making good decisions. However, each of these approaches has its own limitations. For example, price movements are not a reliable indicator for determining the long-term direction of the stock market, and short-term market conditions are not consistent across time scales.

Choice of currency pairs
Choice of currency pairs

The fundamental approach uses fundamental factors such as supply and demand, marketability of stocks, strength of a company, marketability of debt, etc., to develop a trading strategy. In contrast, technical analysis uses financial indicators. These include moving averages of prices, trading volume, relative strength ratings, volatility, trends and other factors that traders consider significant. Some traders even combine both approaches in different proportions. Investors also often use more than one technical analysis tool.

An investor must remember that his or her trading strategy must be feasible within his or her risk tolerance. In other words, the strategy should not put too much pressure on the investor. The investor should make decisions based on the amount of time he or she has available to invest. If the decision to invest requires a quick turnaround, it should not necessarily mean that the investor has to cut back or incur financial losses.

A good trading strategy should also be able to account for short-term volatility, which can fluctuate in any market situation. This means that an investor must learn to ride the waves of change. This is why technical analysis is often used as a way to incorporate economic perspectives into fundamental analysis. Technical indicators are able to provide the trader with data that may not be available in other ways.

As mentioned earlier, fundamental trading strategies depend heavily on the investor's ability to interpret the data. This is not possible if the investor relies solely on fundamental analysis. In that case, the investor is likely to miss the opportunity to take advantage of price fluctuations. In other words, technical and quantitative trading strategies complement each other.

Many investors do not understand the importance of having a trading plan. Their trading strategies are often too haphazard. As a consequence, they do not fulfill their plans and incur heavy losses. To avoid such problems, a trader should develop a plan, stick to it and then act in a disciplined manner. In addition, it is important to develop a plan according to the size and duration of each trade.

Features of the USD/JPY currency pair 

The U.S. dollar and the Japanese yen (JPY) are the two most traded currency pairs in the world. The U.S. dollar and the euro (USD/EUR) are the two largest currency pairs in the world. They have a wide range of interchangeable points, known as the "interbank" market.

This market consists of banks trading currencies, which are the two main trading partners in this market. If you are a novice trader interested in buying and selling the US dollar and Japanese yen (USD/JPY), you first need to know the daily range for these currencies. The daily range is the difference between the current value of one currency and the other. It is calculated as the price in relation to the base currency, multiplied by the exchange rate.

The characteristics of the currency pair USD/JPY are determined by two main factors, namely, news regarding the economy of both countries. News relating to the economy are published in the form of reports and news releases. Be sure to keep an eye on the economic news and reports. The daily range is influenced by news from around the world, which can affect USD/JPY trading.

News regarding the US dollar and the Japanese yen (USD/JPY) affects the daily range of the USD/JPY depending on what is happening in the US and Japan. When the US government decides to loosen its grip on the economy, interest rates rise and the value of the currency falls. This causes a strong reaction in the Japanese stock market and the Japanese economy takes a hit. A trader who wants to trade on USD/JPY should be aware of these events and pay attention to the daily range.

Economic news from other countries can have an impact on the value of the pair you are trading. News related to the politics and the state of any country's economy can have a significant impact on the value of the currency pair. For example, when a country has a new government, the popularity of the leader can increase and this can lead to an improving economy, which can affect the value of the currency pair. If you want to trade USD/JPY, these news are important and must be taken into consideration in your trading strategy. 

These are just a few of the characteristics you should pay attention to when trading against USD/JPY. Of course, these characteristics are just some of the many that affect the performance of a particular currency pair. However, by taking a quick look at these factors, you will be able to determine which ones are most important to you and your trading strategy. You will then be able to move on to other characteristics that may also be important to you. 

How to start trading USD/JPY in India 

Once you decide to open an account to trade USDJPY in India, the next step is to find the right broker. Finding the right online broker to invest your money is vital. If you are just starting out, it is advisable to find a reliable source where you can get free advice. You can turn to forums as well as review sites to help you find a good broker. Once you settle on a particular broker, you can open an account with them.

It is important to open a trading account if you plan to start investing in USDJPY trading. It is not difficult at all, you just need to go through the registration stage on the trading platform. It will take you no more than 10 minutes. Once you have completed the registration process, you will need to fund your account. 

Registrating on the investing platform
Registrating on the investing platform

To complete this process, the platform will ask you for verification. This process will protect your funds from intruders. 

Do not invest huge sums of money at once, start with a small deposit, this will allow you to learn how to trade with a minimum risk of losing your funds. Remember that you can always use a demo account, which is provided by an online broker for beginners. This account has virtual funds, in case you lose them, you will not have to worry about your own budget.  

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