Spread Betting GBP/JPY

The GBP/JPY currency pair is nicknamed “The Beast”. If you are a novice at spread betting on the Forex market, that is all you should need to know. If you have a little more experience, then you may be attracted by the volatility that this pound sterling versus Japanese yen pairing demonstrates.

This pair is also called the “Geppy”, simply a distorted corruption of its initials, or “The Dragon”. It is popular, principally for the reason that it is so volatile, and thus promises riches to those who are able to master it. Some beginners are fooled by this because it seems to offer what you need when trading, namely frequent large moves, but many will learn that lesson the hard way. If you practice tight stoploss levels, then the Geppy will kick you out of your trade for a loss much of the time. On the other hand, if your position sizing and money management skills are lacking, you will still struggle to make a profit.

That deals with the overall characteristics of the Forex pairing GBP/JPY. Considering the basics, you are probably well aware of the pound sterling and the influences that can move its value relative to other currencies. For instance, you can watch for general health of the economy, and for announcements such as the jobless figures, the balance of trade, and the rate of inflation.

The Japanese yen is similarly influenced by economic factors. Japanese manufacturing is well-known the world over, in fact it is likely that you own or have owned a Japanese car or motorcycle, and many hi-fi and high-tech components have their origin in Japan. While there has been a move away from purely Japanese manufacture, and into industrial plants in the countries where the products are being sold, this has been to some extent to placate other countries. In the end, the profits benefit the parent company.

If you are prepared to be excited and frustrated by betting on the GBP/JPY, then the best approach is to make sure that your trading strategies include excellent money management practices. It is wise to follow the movement of the pairing for several weeks before entering into any bets, simply to develop a feel for its movement. When you do start betting on it, practice with small bets until you develop confidence. The price has been known to swing well over 100 pips per day, and sometimes as much as 200, which means that you need to have leeway on your stop losses to prevent being closed out too quickly, and in turn this means that your bets must be smaller to avoid losing too much if it continues to turn against you.

The upside of this is that you can win big when the bet goes in your favour, and this is what continues to attract traders to the market. As long as you are prepared to proceed cautiously, and learn from experience you may find that spread betting the GBP/JPY will be profitable in the long run.

Spread Betting on the GBP/JPY Rolling Daily

The GBP/JPY, pound sterling vs. Japanese yen, is considered one of the most volatile Forex currency pairs, and thus presents both a great opportunity for profit in experienced hands and danger for the inexperienced trader. The current spread betting price is 11,953.4 – 11,956.2. If you think that the yen will weaken, then you might place a long bet (as the yen is the second currency) at £2 per point.

If you are correct, and the value of the Forex pair rises showing a strengthening pound and/or weakening yen, then you could close your bet and take your profits as it reached say 12,124.7 – 12,127.5. This is how you would figure out how much you have won: –

  1. Your long bet was placed at 11,956.2.
  2. The bet was closed at the selling price of 12,124.7.
  3. You gained 12,124.7-11,956.2 points.
  4. The total points gained were 168.5.
  5. Your stake was £2 per point.
  6. You won 168.5 times £2.
  7. Total winnings were £337.

Sometimes, you will find that the bet loses, and you have to work out how much it has cost you. Say in this instance the spread betting price dropped to 11,916.2 – 11,919.0, and you decided to close your bet so that you did not lose any more. You work out your losses in a similar way: –

  1. Your long bet was placed at 11,956.2.
  2. The bet was closed at the selling price of 11,916.2.
  3. You lost 11,956.2 minus 11,916.2 points.
  4. The total points lost were 40.
  5. Your stake was £2 per point.
  6. You lost 40 times £2.
  7. Total losses were £80.

As these were daily rolling bets, there would also be a small interest adjustment charged for each day that they were held, in the evening when the bet was rolled over.

Considering now the other case that you think sterling is weak in comparison with the Japanese economy, and want to take a short position on the pairing. Going back to the original quotation, you could have placed a sell bet at 11,953.4 for £6.50 per point. Perhaps the rate dropped to 11,734.2 – 11,737.0 and you closed the bet to take the profit. Here’s the calculation: –

  1. You placed a sell bet at a price of 11,953.4.
  2. You closed the bet when the price was 11,737.0.
  3. You gained 11,953.4 minus 11,737.0 points.
  4. Your total gain was 216.4 points.
  5. At a price of £6.50 per point, your total winnings were £1406.60.

Whenever you trade the markets, you must consider what would happen if the price goes against you. This is particularly important when spread betting on the GBP/JPY, as this currency pairing is known for its volatility, and for moving without warning. Suppose it went up to 11,992.6 – 11,995.4, and you closed your bet to cut your losses.

  1. You placed a sell bet at a price of 11,953.4.
  2. You closed the bet when the price was 11,995.4.
  3. You lost 11,995.4 – 11,953.4 points.
  4. Your total loss was 42 points.
  5. At a price of £6.50 per point, your total losses were £273.

Spread Betting on the GBP/JPY Futures

The current quote for a futures style bet on the GBP/JPY is 11,892.8 – 11,911.6 for an expiry five months away. The “Geppy”, as is known, is very volatile, and can easily shift 100 or 200 points in a day, so the spread of 18.8 points in this quotation is to be expected.

If you think that the pound sterling is going to increase in value against the Japanese yen, then you would want to place a long bet on this currency pair, buying at 11,911.6, and staking say £5 per point. Let’s assume that the rate goes up to 12,205.7 – 12,224.5, and you decided to cash in your bet and collect your winnings. It is fairly easy with spread betting to work out how much you get.

You closed your bet at 12,205.7, the lower of the two numbers as you close a long bet at the “selling” price. Taking away 11,911.6, you can work out that you have gained 294.1 points. Because you staked £5 per point, that means you have won £1470.50.

If the price goes in the wrong direction after you have placed your bet, you are faced with the decision to close your bet and accept your loss, or to hang on hoping things will turn around. This shouldn’t really be a problem. When you place your bet, you should also figure out exactly how far it can go against you before you close the bet and cut your losses, and the hallmark of a good trader is that they always follow this plan rather than succumbing to emotion.

If you find yourself hesitating to close your bet, even though it has dropped to the level when you know you should, what you need to do is consider this – if it is hard to close your bet and accept the loss when it is this size, how much more difficult would it be if you left the bet in place until you had lost twice as much?

Let’s assume that you had decided you would let the price move up to 50 points against you before you closed the bet for a loss. Because of the spread, this would actually mean a bigger loss of nearly 70 points. It should not be based on a guess, but on some technical analysis, whether by moving averages, support and resistance, average true range, or some other indication, and the amount it costs you should be something that is acceptable without seriously impacting your account.

So when you see the price quoted at 11,841.9 – 11,860.7, you realize that you must close the bet and accept your loss. Here’s how you work out what your loss amounts to.

You opened your bet at 11,911.6, and it dropped to 11,841.9 by the time you closed it. That is a difference of 69.7 points. You wagered £5 per point, so you simply multiply this by the number of points to find that your total loss was £348.50.