I have been asked to comment on some of my findings regarding trading the GBP/JPY pair. I have spent several months and several 18-20 hour days studying and learning how this pair trade. Although I am sure I am a long way from knowing everything I should and would like to know about them, I have found some very intersting concepts that I would like to share with those that are interested in trading this pair. I would also welcome anyone with addtional information concerning GBPJPY to enlighten us with your ideas and thoughts that would benefit us all to be better traders.
First the place to start is understanding the relationship that exists between this pair GBP/JPY. It is the product of the following pairs. GBP/USD and USD/JPY, if you multiply the value of the 2 together you will come up with the approximate value at all times for GBP/JPY. Considering that the GBP/JPY are a pair in itself and trade independently you will be amazed how the other two pair's product reflect the actual price of the GBP/JPY within a few pips.
Once I discovered that, I spent a lot of time trying to see if there was a point that if GBP/JPY got too far away from this formula of multiplying the other two values together that might give me a heads up to some type of price movement coming. So far after spending more hours then I would like to admit to I found none. In fact the price of GBP/JPY follows a pattern so closely of this product that it is hard to find any variance 99% of the time.
So, finding nothing there I tracked on. My next efforts lead me to studing the usd/jpy more closely in its relationship to the pair. Now what I am going to explain next I am sure that someone has a better way to explain but here is my explaination of this important finding.
When you multiply 2 numbers to together to get a product. Example 2 times 10 = 20 , 3 times 10 = 30 2 times 11 = 22 I am sure everyone is still with me here right ? Okay first I increased the smaller number (2) by 1 making it 3, then I increased the larger number (10) by 1 making it 11. The product of the two increased at different percentage although they both values before multiplication were just increased by 1 both times... the first answer 30 is 50% more then 20, but the second answer 22 is only 20% more, yet the values both times were increased by only 1. Believe me this is not higher math here, but is important.
So when you multiply the value of usd/jpy times gbp/usd the same thing is happening . When the usd/jpy increasing in value 1 pip and the gbp/usd stays the same the value for gbp/jpy increases a higher percentage making it move more pips then when the value of usd/gbp increase by only 1 pip. You may need to read this a few times to fully understand but here is the outcome.
When the usd/jpy moves 1 pip up the gbp/jpy moves up more because of there relationship to their formula of usd/jpy times gbp/usd = gbp/jpy value.
Most of everything I know about this pair is because of the above.
Examples:
1. usd/jpy moves up or down 1 pip = gbp/jpy moves up or down more then 1 pip
2. usd/jpy moves up 1 pip and gbp/usd moves down 1 pip at same time = gbp/jpy to still move up . and same on the opposite
3. usd/jpy moves up 1 pip and gbp/usd moves up 1 pip = gbp/jpy moves up more then 2 pips and same on opposite down move.
1st conclusion is if both usd/jpy and gbp/usd moving in the same direction then gbp/jpy is rapidly moving in the same direction by more then the total pips combined of the other 2. This is why the daily range on the GBP/Jpy is the highest of all pairs.
More to follow....
First the place to start is understanding the relationship that exists between this pair GBP/JPY. It is the product of the following pairs. GBP/USD and USD/JPY, if you multiply the value of the 2 together you will come up with the approximate value at all times for GBP/JPY. Considering that the GBP/JPY are a pair in itself and trade independently you will be amazed how the other two pair's product reflect the actual price of the GBP/JPY within a few pips.
Once I discovered that, I spent a lot of time trying to see if there was a point that if GBP/JPY got too far away from this formula of multiplying the other two values together that might give me a heads up to some type of price movement coming. So far after spending more hours then I would like to admit to I found none. In fact the price of GBP/JPY follows a pattern so closely of this product that it is hard to find any variance 99% of the time.
So, finding nothing there I tracked on. My next efforts lead me to studing the usd/jpy more closely in its relationship to the pair. Now what I am going to explain next I am sure that someone has a better way to explain but here is my explaination of this important finding.
When you multiply 2 numbers to together to get a product. Example 2 times 10 = 20 , 3 times 10 = 30 2 times 11 = 22 I am sure everyone is still with me here right ? Okay first I increased the smaller number (2) by 1 making it 3, then I increased the larger number (10) by 1 making it 11. The product of the two increased at different percentage although they both values before multiplication were just increased by 1 both times... the first answer 30 is 50% more then 20, but the second answer 22 is only 20% more, yet the values both times were increased by only 1. Believe me this is not higher math here, but is important.
So when you multiply the value of usd/jpy times gbp/usd the same thing is happening . When the usd/jpy increasing in value 1 pip and the gbp/usd stays the same the value for gbp/jpy increases a higher percentage making it move more pips then when the value of usd/gbp increase by only 1 pip. You may need to read this a few times to fully understand but here is the outcome.
When the usd/jpy moves 1 pip up the gbp/jpy moves up more because of there relationship to their formula of usd/jpy times gbp/usd = gbp/jpy value.
Most of everything I know about this pair is because of the above.
Examples:
1. usd/jpy moves up or down 1 pip = gbp/jpy moves up or down more then 1 pip
2. usd/jpy moves up 1 pip and gbp/usd moves down 1 pip at same time = gbp/jpy to still move up . and same on the opposite
3. usd/jpy moves up 1 pip and gbp/usd moves up 1 pip = gbp/jpy moves up more then 2 pips and same on opposite down move.
1st conclusion is if both usd/jpy and gbp/usd moving in the same direction then gbp/jpy is rapidly moving in the same direction by more then the total pips combined of the other 2. This is why the daily range on the GBP/Jpy is the highest of all pairs.
More to follow....