Abstract:

The purpose of this article is analysis of the risk of speculative strategy for trading the currency pair USD/JPY. The proposed speculative strategy works with the assumption of everyday increase of intra-day volatility at the specified time. The reason is opening of Tokyo Trading Session at 2:00 AM UTC+1. With regard to the time of holding the speculative positions this is a short-term strategy where at 11:59 PM UTC+1 all open positions are closed. For the reason of the short-term position holding the difference between the buy and the sell price reaches tenths of a dollar (for 1 USD investment). Effectiveness of the speculative strategy is increased by financial leverage which is able to increase effectiveness of the strategy 10 – 1000 times. The size of the financial leverage depends on the selection of the provider of access to the currency market and also on the selection of the trader. The purpose of this article is a detailed analysis of the controlled risk increase in relation to the achieved overall profit from the speculative strategy. The analysis has been performed for the period from 1 January 2004 to 31 July 2013.