What Are the Best Times to Trade for Individual Currency Pairs?

Most currencies in the FX market are quoted with the U.S. dollar as
the base and primarily traded against it before translating into other
currencies. In the GBP/JPY case, for a British pound to be converted
into Japanese yen, it has to be traded against the dollar first, then into
yen. Therefore, a GBP/JPY trade involves two different currency transactions,
GBP/USD and USD/JPY, and its volatility is ultimately determined
by the correlations of the two derived currency pairs.







Since GBP/USD and USD/JPY have negative correlations, which means their
direction of movements are opposite to each other, the volatility of
GBP/JPY is thus amplified. USD/CHF movement can also be explained
similarly but has a greater intensity. Trading currency pairs with high
volatility can be very lucrative, but it is also important to bear in mind
that the risk involved is very high as well. Traders should continuously
revise their strategies in response to market conditions because abrupt
movements in exchange rates can easily stop out their trading orders or
nullify their long-term strategies.