GBP/JPY is a remarkable pair. It is also know as a Dragon. Some traders also call it Orient Express. It lost 1,236 pips in 24 hours. This was not yesterday. It happened on 6th May 2010 when GBP/JPY decided all of a sudden to shed 1,236 pips. This is an very good example of market showing extreme risk aversion. This happened due to the market extreme aversion to risk. Sometimes the market is risk averse and sometimes it shows a strong risk appetite. Risk Aversion happens in the market when the buyers and sellers are not willing to take undue risk. Now it happens sometimes the market participants simply don’t want to take risk at all. When this happens we say the market is showing extreme risk aversion. Market participants will want to go with the safest route, selling high yielding currencies and buying low yielding currencies. This is precisely what happened on that day in May in 2010 when GBP/JPY lost 1,236 pips in just 1 day. GBP/JPY has made many memorable achievements that include:
On 12/18/13, the GBPJPY messed around and moved 431 pips in a single day
On 4/4/13, the Orient Express got frisky and jolted 643 pips in 24 hours
On 5/6/10, the GBPJPY had a hot cup of coffee and then cranked out 1,236 pips
And let’s not forget–how can we ever forget??–when the GBPJPY dropped a whopping 9,648 pips in only six months (July, 2008-January, 2009)
We love to trade GBP/JPY. GBP/JPY is an ideal pair for scalping if you don’t get scarred by it’s volatile nature. Imagine you were on your trading desk on 6th May 2010 and you enter into the short trade at the right time and got out at the right time netting in more than 1000 pips in just 24 hours. It would have been a remarkable trade that you would have remembered all your life.
Trading is all about capturing pips with the lowest level of risk. In order to capture pips with lowest level of risk, you need a good trading system. It is a fact. Each currency pair behaves differently. Each pair has a different personality. You cannot trade GBP/USD with the same strategy that you use for EUR/USD. In the same manner GBP/JPY requires altogether a different approach when trading. You cannot mess around with the Dragon too much. Take a look at this GBP/JPY strategy that has been developed by DailyFX team. Now we trade GBP/JPY with our swing trading system that works well for all pairs. If you haven’t downloaded our Swing Trading System, you can do so right now by registering for our Swing Trading Newsletter. Before you go, you can also take a look at this GBP/JPY Hedge Double Knockout Strategy posted on Forex Factory. Just make sure you test this GBP/JPY Strategy on the demo account first.