[XM Trading: For Forex Beginners] Beware of Pound Price Fluctuations

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When using XM, be careful when trading the pound currency pair. The pound pair tends to be more volatile than other currency pairs, and it is not uncommon for a small move to result in a big loss. In order not to lose a lot, it is necessary to devise such as setting the lot low when trading in pounds.

Features of Pound

The British currency, the pound, was once active as a key currency like the current US dollar when the UK was the world’s number one in terms of economy and military power. It is the 4th largest trading volume in the world.

The pound is less liquid than the euro and yen, so it tends to be more volatile than these currencies.

high volatility

The pound is characterized by high volatility. High volatility is an advantage because you can aim for a large profit, but you need to be careful because the risk will also increase if it goes in the opposite direction.

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.