XMTrading: Why the pound is called a killer currency Be careful of price movements

XMTrading

The market for the pound yen and pound dollar currencies is very volatile because of their large price movements. When using XMTrading, you need to be careful when trading Pound currency pairs. Pound pairs tend to have wilder price movements than other currency pairs, and small movements can often result in large losses. In order to avoid big losses, you need to be careful when trading in pounds, such as setting the lot at a low value.

What are the characteristics and price movements of the pound?

The British currency, the pound, was once used as a key currency like the current US dollar when Britain was the world’s number one economy and military power, but now it is used as a reserve currency like the US dollar. It is the fourth largest trading volume in the world after Japan.

The pound has less liquidity than the euro or yen, so its price movements tend to be more volatile than those currencies. This has been influenced by the weaker yen in Japan, and the pound yen tends to be more volatile than the pound dollar or the pound Australian dollar. This is important because it moves the most in financial exchange, so there is a high risk of losing money. Be careful of falling or rising prices.

high volatility

The pound is characterized by high volatility. High volatility is an advantage because you can aim for big profits, but you need to be careful because it also increases the risk if it goes in the opposite direction. Investors need to understand whether they are buying or selling before trading. There is also the possibility that prices will skyrocket as a result of interest rate hikes. This is especially dangerous before policy interest rates.

Source : TradingView

As you can see from the vertical axis, the pound has a very large fluctuation range, so if you do it with the same sense as other currency pairs, there is a high possibility that you will lose a lot.

bank monetary policy

The sterling currency is controlled by the Bank of England (BOE), the central bank of the United Kingdom.

After the Monetary Policy Committee, which decides monetary policy, the BOE releases the minutes at the same time in addition to the usual announcement of results. In addition, quarterly inflation reports are also published at the same time.

Correlation with Euro

The pound is geographically close to the euro zone and has a deep political and economic relationship, making it one of the currencies that has a strong correlation with the euro.

Active after European time

As the pound is the currency of the United Kingdom, like the euro, its price movements are sluggish during Tokyo time, and trading tends to be active after European time.

For short-term trading such as day trading, it may be more efficient to trade mainly after European time.

Points to note when trading the pound

As mentioned above, the pound is characterized by very high volatility compared to other currency pairs. Therefore, one wrong step can cost you a lot of money.

keep the lot down

The pound is more volatile than the euro and the US dollar. Try to trade with as few lots as possible.

Drop positions during economic indicators

The pound is more volatile than the euro and the US dollar. When it comes to economic indicators, there is a big movement, so if there is a possibility of making a big profit, there is also a possibility of a big loss. It is better not to do it during economic indicators as much as possible.

get used to price movements

If you want to trade in pounds first, practice trading. The pound is very volatile and dangerous. Until you get used to it, do not increase the lot and trade small.

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