The Japanese Yen can be a lucrative Asian/Oriental Market for Trading. Each Yen price-tick is valued at
$12.50, resulting in a move from 72.00 to 73.00 equaling a large profit or trading loss of $1,250.00.
The Japanese Yen futures market is heavily traded at the Chicago Mercantile Exchange and also at other international financial exchanges. Open interest is large,
and daily trading volume is high. Thus ranking the Yen Contract
the #2 foreign currency market behind the German Deutsche Mark.
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The Japanese Yen currency market has a history of excellent
long term trends, making the Yen a very good currency futures market to trade,
except for one major pitfall! Unfortunately, an all too
common occurrence is GAP OPENINGS when doing
foreign exchange trading.
Sometimes, depending
on overnight fundamental news and news events, or technical issues, the
japanese yen market may open dramatically lower or higher.
For example, the yen may close at 72.50 but open at 71.30 the next
trading day on the floor of the CME in Chicago. If you
were long you would have a large loss of $1,500.00. That
would occur even if your stop-loss was much smaller than
this because stop-losses offer no protection against gap-openings.
Still another problem with the Japanese Yen is on occasion the
market has a powerful move, much greater than normal. For example, there was a
day this website editor recalls watching closely with a move of over 450 points, representing potential
loss or gain in excess of $5,600.00, based on just one contract during one
trading day!
Another possibility is placing overnight resting stop-loss orders in the
ECN Electronic Market in order to
prevent the unexpected large price gaps from going against you. These are very
useful trading tools in helping to trade all of the foreign currencies. The best way to protect
against the occurrence of a significant intra-day loss is to use comparatively
small stop-loss orders during the trading day and ALWAYS have them placed
(this means no so called mental stops).
The best way to guard against huge gap openings is to
not trade on days potential fundamental news is expected, such as Group of
Seven Meetings, etc. You can hear about possible important fundamental events
by checking with your commodity broker or
commodity trading advisor,
or by reading the financial news closely, such as The Wall Street Journal.
Still another way is to only trade the Japan Yen providing
you have double margin available in your account as a cushion. In other words,
if your broker requires $2,500.00, only trade it if you have $5,000.00
available in account margin.
 The "best" way to trade the Japanese Yen
profitably is using a conservative trading methodology. However, if doing
position trades vs international
daytrading you will need to contend with the ever-present possibility
of large over-night losses and price moves against you, and realize an inter-day
stop-loss order will not help protect you from over-night gap-openings against you.
You should check with your commodity broker about his
recommendations for protection when the primary CME market is closed. It's
possible to obtain loss protection via the Chicago Mercantile Exchange Globex
Market or the foreign Cash Currencies Markets, or the
Forex Market. However, the FX Forex cash currency markets were originally intended for large
traders and will also normally entail higher commission costs and risk of loss too.
Remember, don't use so called mental-stops but actually place a
stop-loss order at all times with your futures broker. Inter-day stops should always be in place
and be large enough to avoid getting stopped-out needlessly (usually 99 points
or less) but still reasonable to avoid huge intra-day losses.
Please keep in mind the foreign currency and fx forex trading
market can be volatile and has considerable risk. Studying at a
University for Forex & Futures trading can
help traders achieve success at currencies and forex markets trading!
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