USD/JPY is a very popular currency pair among Forex traders. What’s more, it is one of the most traded instruments on the FX market. The asset boasts a significant volume of daily trading with millions of market participants involved across the globe.
Both proven veterans and beginners choose to trade USD/JPY due to a set of crucial benefits. In this article, we will discuss major reasons why the currency pair can bring your Forex trading approach to a new level.
Round-the-clock market availability is one of the major benefits to opt for Forex trading. Hoverer, historically it is better to buy and sell currencies during the most active trading hours. They will vary depending on your location.
For example, traders from the UK prefer buying and selling pairs between 8 a.m. and 5 p.m. It is the most active timeframe featuring higher traded volumes, which means more trading opportunities and deeper liquidity.
There is also a common rule for all locations. When you trade YS/JPY (just like other major currency pairs), it is better to operate around market announcements and market news.
The pair expresses the relation between the USD and the Japanese yen. While USD hardly requires introduction as one of the world’s strongest currencies representing one of the most powerful economies, JPY turns out to be the third most-traded instrument. What’s more, it takes the 4th position in the list of reserve currencies (after the US dollar, euro, and pound sterling).
Officially established in 1871, the yen has been boasting a considerable value growth backed by the nation's industrial complex. Japan is known for its technological developments, innovations in healthcare and agriculture in addition to a set of exportable products, which make it possible for the yen to stay among top currencies.
To understand, how different factors affect the currency pair, we need to clarify the role of each currency:
While some traders prefer a traditional way to buy and sell USD/JPY (a forex contract) others benefit from trading CFDs (contracts for difference), as one of the simplest ways to speculate on the currency price difference.
The idea behind CFD trading is very simple. It expresses an agreement between two parties (an investor and an online Forex broker) to pay the difference in the asset value. The difference is indicated during the trade’s start and end timeframe.
Trades will have two major options are part of their Forex strategies:
Additionally, you can predict the direction of the underlying asset and speculate on its moves. If you expect the USD to gain value, entering a long position and purchasing CFDs can be a wise decision. If you are sure the currency will lose value against JPY, it is better to enter with a short position and sell CFDs. Another way is to use typical forex contracts and trade USD/JPY in a traditional way.
The concept of trading USD/JPY hardly differs from the one used to trade other major currencies. The only difference here is that the Japanese yen can be influenced by some factors that are more complex compared to the USD.
Nevertheless, it is still one of the most traded currency pairs. The asset is backed by two strong economies, which makes this option safe and simple to get started with. FX traders can use traditional forex contracts or trade USD/JPY as CFDs.
This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.