USD/JPY Spread Betting

In Forex, the Japanese yen (¥) holds a unique position, and you need to know this when spread betting in the Forex market. While for all other currencies the value of the “pip” is the fourth decimal place, it is different when the yen is involved. Because there are close to 100 Japanese yen to the dollar, to the pound sterling, or to other majors, the pip in this case is only the second decimal place.

The way IG Index and some other spread betting providers accommodate this is by quoting all their prices in the region of 10,000, which means a spread betting point is always the same as the pip. For instance, between other currency pairs such as the GBP/EUR the quote is approximately 12,400, and in real life £1 is approximately €1.24. For the Japanese yen, the USD/JPY is quoted as approximately 7800. This does not mean that one US dollar is ¥0.78, but that $1 is about ¥78. The spread betting point remains the same, the unit of the quoted price, for consistency.

Forex Spread Betting: USD/JPY

You can see from this daily price chart that the USD/JPY has been fairly volatile recently, including candlesticks that are 70 or more points in length. The trend has been generally downward, a reflection of the continued struggles of the US economy against a more stable Japan, which is known more for its manufacturing and exports around the world. Relatively, the Japanese yen has been in an uptrend.

When you are trading on a short-term basis, you are interested in a much smaller time span. The four or five days on the right-hand side represent a strong uptrend for the US dollar, which is supported by the signal from the MACD below. When spread betting on Forex, you have to keep an eye on the latest news, as trade figures and the health of the country’s economy can have a large effect on how the currencies perceived. Even though there are relatively few currency pairs compared to, for example, spread betting on the stock market, there is much more information available about each.

Forex USD/JPY Rolling Daily

The current quote from IG Index for a rolling daily spread bet on the USD/JPY is 7849.4 – 7850.2. You may think that the dollar is going to strengthen against the Japanese yen, and this would correspond to a long bet on the currency pair. Say you decided to wager £1.25 per point on a buy bet.

If your hunch is correct, then you may find that the price rises up to 7986.5 – 7987.3, and you can close your bet and collect your winnings. You can work out how much they are like this: –

  • Your bet was placed at 7850.2
  • Your bet closed at 7986.5
  • Therefore you gained 7986.5 minus 7850.2 points
  • This works out to 136.3 points
  • Your wager was for £1.25 per point
  • Therefore you won 136.3 times £1.25
  • The total won is £170.37

Of course, you must also accept that sometimes the bet will go against you. Perhaps it might drop to 7742.3 – 7743.1, and you would decide to cut your losses and close the bet.

  • Your bet was placed at 7850.2
  • Your bet closed at 7742.3
  • Therefore you lost 7850.2 minus 7742.3 points
  • This works out to 107.9 points
  • Your wager was for £1.25 per point
  • Therefore you lost 107.9 times £1.25
  • The total lost is £134.87

Many traders decide it is easier to use a stop loss order, which is usually placed when you take out the bet, to close a losing trade automatically as soon as it reaches a level that you set. This way, you do not have to keep watching the markets. Suppose a stoploss order closed your bet when the quote was 7763.9 – 7764.7.

  • Your bet was placed at 7850.2
  • Your bet closed at 7763.9
  • This time you lost 7850.2 less 7763.9
  • Which is 86.3 points
  • Your wager was for £1.25 per point
  • Therefore you lost 86.3 times £1.25
  • The total lost is £103.56

USD/JPY Forex Spread Betting: Futures

If you want to take a medium-term view of the currency market, you may be tempted to place a futures based spread bet. These have expiry dates several months into the future, and cost you nothing to hold open until that time. You might choose to place a short bet for £2.50 per point on the far quarter USD/JPY which is currently priced at 7830.9 – 7842.4. Note that even if you have a futures based bet, you can close it at any time you want, whether to take profit or to prevent further losses.

For the sake of example, assume that the price goes in the direction that you want, and you take your profit when the quote is 7657.3 – 7668.8. With a short bet, it opens on the selling price which in this case was 7830.9, and closes on the buying price of 7668.8. 7830.9 minus 7668.8 is 162.1 points or pips. You staked £2.50 per point, so this works out to a profit of £405.25.

For a second example, assume with the same bet that the price went in the other direction, and you closed the bet for a loss when the quote was 7971.6 – 7982.2. This time the closing price was 7982.2, so taking away the opening price of 7830.9 you find that you have lost 151.3 points. Multiplying this out again, it works out to a total of £378.25.

Many spread betters decide that a stoploss order can save them some money. This is because a stoploss order tells your broker when to close a losing trade, even if you are not watching the markets or online at the time, so it can act quicker than entering a closing order yourself. With a stoploss order this bet might have been closed at 7942.2 – 7954.0. The loss this time would be 7954.0 less 7830.9, which is 123.1 points. For your chosen size of stake, this would cost you £307.75.

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