oussama94
05-29-2017, 00:34
Most currencies in the ** market are quoted with the U.S. dollar
as the base and primarily traded against it before translating into other
currencies. In the GBP/JPY case, for a British pound to be converted
into Japanese yen, it has to be traded against the dollar first, then into
yen. Therefore, a GBP/JPY trade involves two different currency transactions,
GBP/USD and USD/JPY, and its volatility is ultimately determined
by the correlations of the two derived currency pairs. Since GBP/USD
and USD/JPY have negative correlations, which means their direction of
movements are opposite to each other, the volatility of GBP/JPY is thus
amplified. USD/CHF movement can also be explained similarly but has a
greater intensity. Trading currency pairs with high volatility can be very
lucrative, but it is also important to bear in mind that the risk involved
is very high as well. Traders should continuously revise their strategies
in response to market conditions because abrupt movements in exchange
rates can easily stop out their trading orders or nullify their long-term
strategies.
as the base and primarily traded against it before translating into other
currencies. In the GBP/JPY case, for a British pound to be converted
into Japanese yen, it has to be traded against the dollar first, then into
yen. Therefore, a GBP/JPY trade involves two different currency transactions,
GBP/USD and USD/JPY, and its volatility is ultimately determined
by the correlations of the two derived currency pairs. Since GBP/USD
and USD/JPY have negative correlations, which means their direction of
movements are opposite to each other, the volatility of GBP/JPY is thus
amplified. USD/CHF movement can also be explained similarly but has a
greater intensity. Trading currency pairs with high volatility can be very
lucrative, but it is also important to bear in mind that the risk involved
is very high as well. Traders should continuously revise their strategies
in response to market conditions because abrupt movements in exchange
rates can easily stop out their trading orders or nullify their long-term
strategies.